Thomas Company trades in a printing press for a newer model. The cost of the old printing press was $61,500, and accumulated depreciation up to the date of the trade-in amounts to $38,000. The company also pays $41,200 cash for the newer printing press. The journal entry to acquire the new printing press will require a debit to Equipment for:
A) $41,200.
B) $61,500.
C) $64,700.
D) $102,700.

Question

Quizplus · Accepted Answer

The cost of the old printing press is $61,500 and the accumulated depreciation is $38,000, so the carrying amount of the old printing press is $23,500 ($61,500 - $38,000). When the old printing press is traded in for a newer model, the company must record the difference between the cost of the new printing press and the carrying amount of the old printing press, which is $41,200 - $23,500 = $17,700. Therefore, the journal entry to acquire the new printing press requires a debit to Equipment of $41,200 and a credit to Equipment of $23,500, resulting in a net debit of $17,700, which is the amount the company paid to upgrade the equipment. Therefore, the correct answer is $64,700 ($41,200 + $23,500).

Thomas Company Trades in a Printing Press for a Newer