Equipment costing $118,000 has accumulated depreciation of $92,000.The equipment is a trade-in for new equipment costing $187,000.If the trade-in value received for the old equipment is $30,000,the journal entry to record this transaction is to:

Question

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The cost of the new equipment is debited for $187,000, the accumulated depreciation of the old equipment is credited for $92,000, the old equipment is credited for its net book value of $118,000 ($118,000 - $92,000), and cash is credited for $157,000 ($187,000 - $30,000). Additionally, there is a gain on the exchange of assets of $4,000, which is credited to an account called Gain on Exchange of Assets. Therefore, the journal entry is as follows:

Debit: Equipment (New) $187,000
Debit: Accumulated Depreciation – Equipment (Old) $92,000
Credit: Equipment (Old) $118,000
Credit: Cash $157,000
Credit: Gain on Exchange of Assets $4,000

Equipment Costing $118,000 Has Accumulated Depreciation of $92,000