A truck costs $50,000 when new and has accumulated depreciation of $35,000.

Suppose Wilson Towing exchanges the truck for a new truck. The new truck has a
market value of $60,000, and Wilson pays cash of $40,000. Assume the exchange has
commercial substance. What is the result of this exchange?
a. No gain or loss
b. Gain of $5,000
c. Loss of $5,000
d. Gain of $45,000

Old Machine $50,000

Acc Dep 35000

Book value 15000

New amchine 60000

Cash paid 40000

Answer:
loss on disposal   10,000
Explanation:
Olda Machine 100,000
Acc Dep           (70,000)
Book Value   30,000

Olda Machine 100,000

Acc Dep           (70,000)
Book Value   30,000
new Machine                120,000
cash payment               (100,000)
value of the machine 20,000
traded value 20,000 - book value 30,000 = 10,000 loss
Other way to calculate:
receive     - given up   = result
120,000   - (100,000 cash + 30,000 machine) = -10,000
Journal entry:
machine             120,000
acc depreciation 70,000
loss on disposal   10,000
              cash                          100,000
              old machine             100,000