On June 1, 2019, Kirkland Company traded in equipment to acquire new equipment that has a $15,000 cash price. The book value of the old equipment is $2,400. Kirkland receives a $3,000 trade-in allowance and, therefore, pays $12,000 cash plus the old equipment to acquire the new equipment.
In recording this transaction, Kirkland should reflect:

Question

Quizplus · Accepted Answer

The gain is calculated as the trade-in allowance ($3,000) minus the book value of the old equipment ($2,400), which equals $600.

On June 1, 2019, Kirkland Company Traded in Equipment to Acquire