Warrior Dash Express Inc.owns a moving van that originally cost $500,000 and currently has $450,000 of accumulated depreciation.The fair value of the moving van is $120,000.Warrior Dash Express Inc.exchanges the van plus $480,000 in cash for a new moving van costing $600,000. The entry to record the transaction is as follows:
A)Equipment (new van) ........... 600,000
Accumulated Depreciation (old van) ....................450,000
Equipment (old van) ....................... 500,000
Cash ..............................480,000
Gain on Trade-in of Old Van ................ 70,000

B)Equipment (new van) ............................... 600,000
Accumulated Depreciation (old van) .............450,000
Equipment (old van) ..................... 570,000
Cash ............................ 480,000

C)Equipment (new van) ............... 600,000
Accumulated Depreciation (old van) ....................380,000
Equipment (old van) ......................... 500,000
Cash ....................................... 480,000

D)Equipment (old van) ...............500,000
Cash ........................ 480,000
Gain on Trade-in of Old Van ...........................70,000
Equipment (new van) ..................................... 600,000
Accumulated Depreciation (old van) .............450,000

E)Equipment (old van) ................. 570,000
Cash ............................. 480,000
Equipment (new van) ................... ... ... 600,000
Accumulated Depreciation (old van) ..................... .....450,000

Question

Warrior Dash Express Inc.owns a moving van that originally cost $500,000 and currently has $450,000 of accumulated depreciation.The fair value of the moving van is $120,000.Warrior Dash Express Inc.exchanges the van plus $480,000 in cash for a new moving van costing $600,000. The entry to record the transaction is as follows:
A)Equipment (new van) ........... 600,000 
Accumulated Depreciation (old van) ....................450,000
Equipment (old van) ....................... 500,000
Cash ..............................480,000
Gain on Trade-in of Old Van ................ 70,000

B)Equipment (new van) ............................... 600,000 
Accumulated Depreciation (old van) .............450,000
Equipment (old van) ..................... 570,000
Cash ............................ 480,000

C)Equipment (new van) ............... 600,000 
Accumulated Depreciation (old van) ....................380,000
Equipment (old van) ......................... 500,000
Cash ....................................... 480,000

D)Equipment (old van) ...............500,000 
Cash ........................ 480,000
Gain on Trade-in of Old Van ...........................70,000
Equipment (new van) ..................................... 600,000
Accumulated Depreciation (old van) .............450,000

E)Equipment (old van) ................. 570,000 
Cash ............................. 480,000
Equipment (new van) ................... ... ... 600,000
Accumulated Depreciation (old van) ..................... .....450,000

Quizplus · Accepted Answer

The correct entry involves removing the old van's cost and accumulated depreciation, recognizing the cash paid, and recording the new van at its cost. The gain is calculated as the fair value of the old van ($120,000) plus cash paid ($480,000) minus the old van's net book value ($50,000), which equals $70,000.