When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with which of the following entries?
A) debit Machinery and Accumulated Depreciation; credit Machinery and Cash
B) debit Cash and Machinery; credit Accumulated Depreciation
C) debit Cash and Machinery; credit Accumulated Depreciation and Machinery
D) debit Machinery, Accumulated Depreciation, and Loss on Exchange of Machinery; credit Machinery and Cash

Question

Quizplus · Accepted Answer

When a company exchanges machinery and receives a trade-in allowance less than the book value, it results in a loss. Therefore, the entry should debit Machinery, Accumulated Depreciation, and Loss on Exchange of Machinery and credit Machinery and Cash.

When a Company Exchanges Machinery and Receives a Trade-In Allowance