Exchange of depreciable assets

Exchange of depreciable assets - one asset for another...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Exchange of depreciable assets . Certain types of assets, particularly vehicles and large pieces of  equipment, are frequently exchanged for other tangible assets. For example, an old vehicle and a  negotiated amount of cash may be exchanged for a new vehicle.  There are two types of exchanges: similar exchanges and dissimilar exchanges. A  similar exchange  involves the exchange of one asset for another asset that performs the same type of function.  Trading in an old delivery truck to purchase a new delivery truck is an example of a similar exchange.  dissimilar exchange , which is less common than a similar exchange, involves the exchange of 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: one asset for another asset that performs a different function. Trading in an old truck for a forklift is an example of a dissimilar exchange. Suppose a $90,000 delivery truck with a net book value of $10,000 is exchanged for a new delivery truck. The company receives a $6,000 trade-in allowance on the old truck and pays an additional $95,000 for the new truck, so a loss on exchange of $4,000 must be recognized. Cost of Truck Traded In $90,000 Less: Accumulated Depreciation (80,000) Net Book Value 10,000 Trade-in Value (6,000) Loss on Exchange $4,000...
View Full Document

This note was uploaded on 11/14/2011 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online