The Pizza Store trades in a delivery car for a newer model. The old delivery car has a cost of $ 9 comma 000 and accumulated depreciation of $ 7 comma 000. The Pizza Store pays cash of $ 6 comma 000. The fair value of the newer car is $ 17 comma 000. What is the gain or loss for the Pizza Store on the exchange of vehicles?

Question

Business

Maliyah

12 May, 12:16

The Pizza Store trades in a delivery car for a newer model. The old delivery car has a cost of $ 9 comma 000 and accumulated depreciation of $ 7 comma 000. The Pizza Store pays cash of $ 6 comma 000. The fair value of the newer car is $ 17 comma 000. What is the gain or loss for the Pizza Store on the exchange of vehicles?

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Deven Mcclain · Answer 1

The gain on exchnage to Pizza Store is of $9000

Explanation:

The Net Book Value (NBV) of the old car is 9000 - 7000 = 2000

The cash paid for the new car is 6000.

The total cost to Pizza Store of trade is 6000 + 2000 = 8000

The asset received has a fair value of 17000.

There is a gain to Pizza store on exchange of vehicles.

The value of Gain = 17000 - 8000 = $9000

The entry for such an exchnage would be,

New Car at Cost 17000 Dr

Provision for depreciation - old car 7000 Dr

Cost of old car 9000 Cr

Cash 6000 Cr

Gain on exchnage/disposal 9000 Cr