Question
In: Accounting
Problem 33-11 Yellow Company acquired a delivery truck, making payment of $2,680,000, the payment being analyzed...
Problem 33-11
Yellow Company acquired a delivery truck, making payment of
$2,680,000, the payment being analyzed as follows:
Price of truck 2,500,000
Charge of extra equipment 50,000
Value added tax 300,000
Insurance for one year 120,000
Motor vehicle registration 10,000
—————
Total 2,980,000
Less: trade in value allowed on
old truck 300,000
——————
Cash paid 2,680,000
The old truck cost $1,500,000 and has a carrying amount of
$200,000, and fair value of $50,000. The value added tax is
refundable or recoverable.
Required:
Prepare journal entry to record the exchange
transaction.
Solutions
Expert Solution
Calculation of Gain or Loa
|
Calculation of gain or loss on old truck |
||
|
Carrying value of truck |
200,000 |
|
|
Less: Exchange value of truck |
300,000 |
|
|
Gain on exchange |
100,000 |
|
|
Value added tax refundable |
300,000 |
|
|
Cash paid |
2,680,000 |
|
|
Journal Entry |
Debit |
Credit |
|
Truck value (Cost+ old truck value-VAT recoverable) |
2,980,000 |
|
|
Gain on old truck |
100,000 |
|
|
Cash |
2,680,000 |
|
|
Old truck (Carrying value) |
200,000 |
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