Harrod's Landscape Artists acquired a new truck for $42,000 less the trade-in allowance of $4,000 for his old truck. The old truck was purchased for $31,000 and had a book value of $5,000 on the exchange date. The entry to record the acquisition of the new truck will include a:

Question

Quizplus · Accepted Answer

The entry to record the acquisition of the new truck will include a debit to the new truck account for $42,000, a credit to the old truck account for $31,000, a credit to cash for $4,000, and a debit or credit to the gain or loss on the trade-in of truck account. Since the old truck had a book value of $5,000 and was traded in for $4,000, there is a loss on the trade-in of $1,000, which means the entry will include a debit to the loss on trade-in of truck account for $1,000.

Harrod's Landscape Artists Acquired a New Truck for $42,000 Less