On January 5, 2012, Mountain View Company purchased construction equipment for $698,400, with a useful life...

On January 5, 2012, Mountain View Company purchased construction equipment for $698,400, with a useful life of six years and an estimated salvage value of $87,000. The company uses the straight-line method of depreciation. On July 3, 2016, this equipment was traded for new similar construction equipment that has a value of $800,000. The company paid $595,000 in cash and was given a trade-in allowance of $205,000 for the old equipment.

Prepare the general journal entries needed on July 3, 2016, to record the trade-in.

Please do not copy from Chegg otherwise I have to report the answer. Explain the answer thoroughly by showing each step of the calculation.

Expert Solution


Date	Account Titles and Explanation	Debit	Credit
3-Jul-16	Equipment (new)	$ 800,000.00
	Accumulated Depreciation- Equipment (old)	$ 407,400.00
	Loss on Disposal	$ 86,000.00
	Equipment (Old)		$ 698,400.00
	Cash		$ 595,000.00
	To Record Purchase of new equipment and trade _in of old equipment

Cost of old equipment	$ 698,400.00
Accumulated Depreciation = ($684,000 - 87000)/6 x 3.5 yrs	$ (407,400.00)
Carrying Amount	$ 291,000.00
Trade in Allowance	$ 205,000.00
Loss on Sale	$ 86,000.00

ekkarill92 answered 1 year ago

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