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.
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.
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.
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
| 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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