Cowboy Enterprises owns some equipment with an original cost of $59,000 and a book value of $19,000 that is exchanged for a $20,000 notes receivable and $5,000 cash.Which of the following is not part of the entry to record this transaction?

Question

Quizplus · Accepted Answer

The correct entry to record the exchange includes debiting Notes Receivable and Cash for the amounts received, debiting Accumulated Depreciation for the amount of depreciation that has been recorded against the equipment (which is the difference between the original cost and the book value, $59,000 - $19,000 = $40,000), and crediting Equipment for its original cost ($59,000). The gain is calculated as the total consideration received ($20,000 + $5,000 = $25,000) minus the book value of the equipment ($19,000), which equals $6,000. Therefore, the correct entry does not credit Equipment for $19,000; it should credit Equipment for its original cost.

Cowboy Enterprises Owns Some Equipment with an Original Cost of $59,000