Crowe Company purchased a heavy-duty truck on July1, 2014, for $30,000. It was estimated that it would have auseful life of 10 years and then would have a trade-invalue of $6,000. The company uses the straight-linemethod. It was traded on August 1, 2018, for a similartruck costing $42,000; $16,000 was allowed as trade-invalue (also fair value) on the old truck and $26,000 waspaid in cash. A comparison of expected cash flows for thetrucks indicates the exchange lacks commercial substance.What is the entry to record the trade-in?
Crowe Company purchased a heavy-duty truck on July1, 2014, for $30,000. It was estimated that it would have auseful life of 10 years and then would have a trade-invalue of $6,000. The company uses the straight-linemethod. It was traded on August 1, 2018, for a similartruck costing $42,000; $16,000 was allowed as trade-invalue (also fair value) on the old truck and $26,000 waspaid in cash. A comparison of expected cash flows for thetrucks indicates the exchange lacks commercial substance.What is the entry to record the trade-in?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Crowe Company purchased a heavy-duty truck on July
1, 2014, for $30,000. It was estimated that it would have a
useful life of 10 years and then would have a trade-in
value of $6,000. The company uses the straight-line
method. It was traded on August 1, 2018, for a similar
truck costing $42,000; $16,000 was allowed as trade-in
value (also fair value) on the old truck and $26,000 was
paid in cash. A comparison of expected
trucks indicates the exchange lacks commercial substance.
What is the entry to record the trade-in?
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