PLANT ASSET DISPOSALS — EXCHANGE OF SIMILAR ASSETS

Asset Exchanged at a Loss

Asset originally purchased on 1/1/96 is exchanged for a similar asset on 1/1/99. Cash of
$10,000 is also paid and the old asset has fair market value of $4,000 on the date of
exchange.
Equipment Accumulated Depreciation-Equipment
20,000 12/31/96 5,000
12/31/97 5,000
12/31/98 5,000
Bal. 15,000
Book Value = $5,000
Entry:
Equipment (new) 14,000
Accumulated Depreciation-Equipment 15,000
Loss on Disposal 1,000
Equipment (old) 20,000
Cash 10,000
Cost of new asset acquired: Loss on exchange of old asset:
Fair value of old asset $ 4,000 Fair value of old asset $ 4,000
Cash paid 10,000 Book value of old asset 5,000
Cost of new asset $14,000 Loss on disposal ($1,000)

Copyright 1999 John Wiley & Sons, Inc. Weygandt/Principles 5e T T 10–K