Answer:
new equipment 50,000 debit
accumulated depreciation 40,000 debit
loss at disposal: 30,000 debit
old equipment 120,000 credit
--to record trade of equipment--
Explanation:
Let's break the transactions into small parts:
We need to remove the old equipment from accounting along with their accumulated depreciation so:
accumulated depreciation 40,000 debit
old equipment 120,000 credit
Then, we debit the new equipment at fair value:
new equipment 50,000 debit
Last, assuming the trade has commercial substance: we recognize the gain or loss on sale:
book value of traded equipment: 80,000
fair value of new equipment: 50,000
loss at disposal: 30,000
Thus, the journal entry will be as follows:
new equipment 50,000 debit
accumulated depreciation 40,000 debit
loss at disposal: 30,000 debit
old equipment 120,000 credit
