OT- Accounting Question

SundayTiger · Apr 2, 2008

Working on a project and can not figure out the answer to this below.

June 21

Traded the old company truck for a new truck issuing check number
31227 to complete the transaction. The old used truck cost $4,800
and on March 31, the end of the quarter, had depreciated $3,180
Straight-line depreciation on the old truck is $80 per month
(DEPRE). The new truck listed for $18,950 (invoice W3571) and
Wumbaugh Auto Sales allowed a $2,825 trade-in allowance on the
purchase of the new vehicle. No Gain or Loss will be recognized
on this transaction. An additional check (number 31228) for $510
was issued to the Department of Motor Vehicles (invoice DMV06)
for the vehicle license fees. Three entries are required for this
trade.

I thought it would go like this.

Depreciation Expense 240
Accum Depre Truck (240)

Accum Depre Truck 3420
Truck 12705
Cash (16125)

license Fee 510
Cash (510)

CtGuy441 · Apr 2, 2008

think you are correct on the first and third entries.

but the problem never says that any cash is paid for the new truck

you need to take the old truck off the books (credit) at its book value and record the new truck (debit)

truck - new 4205
accum depr truck 3420
truck - old (4800)
trade in allowance (2825)

CtGuy441 · Apr 2, 2008

actually it does say that an additional check was issued. so had to have been cash

truck - new 18950
accum depr truck 3420
truck - old (4800)
trade in allowance (2825)
cash (14745)

shdw01 · Apr 2, 2008

I'm a fucking accountant and this question is a bit confusing....

I think the 3 posted by the OP is correct.

Sounds like cash was used to pay for the new truck (there is some blurb about issuing a check to complete the transaction)

SundayTiger · Apr 2, 2008

First off thanks for taking the time to look at the question.

The question does involve cash.

"Traded the old company truck for a new truck issuing check number
31227 to complete the transaction."

With the assumption that you used a check, it would require and entry to cash. I think my cash is correct, because that balance is not wrong.

shdw01 · Apr 2, 2008

CtGuy441 said:
actually it does say that an additional check was issued. so had to have been cash

truck - new 18950
accum depr truck 3420
truck - old (4800)
trade in allowance (2825)
cash (14745)

this looks much cleaner for JE#2

as an accountant, i always recommend NEVER trade in a car that is on the books. Losses cannot be deducted (for tax deduction purposes) and the basis goes up beyond anything reasonable. (auto depreciation limits are retarded)

CtGuy441 · Apr 2, 2008

shdw01 said:
I'm a fucking accountant and this question is a bit confusing....

I think the 3 posted by the OP is correct.

Sounds like cash was used to pay for the new truck (there is some blurb about issuing a check to complete the transaction)

just saw the first post of "kill yourself thread"

what section did you not pass? just took FAR two days ago as the first section. studying for BEC now

CtGuy441 · Apr 2, 2008

SundayTiger said:
First off thanks for taking the time to look at the question.

The question does involve cash.

"Traded the old company truck for a new truck issuing check number
31227 to complete the transaction."

With the assumption that you used a check, it would require and entry to cash. I think my cash is correct, because that balance is not wrong.

do you konw what accounts you are off on?

the trade-in allowance is throwing me a little bit too

shdw01 · Apr 2, 2008

CtGuy441 said:
just saw the first post of "kill yourself thread"

what section did you not pass? just took FAR two days ago as the first section. studying for BEC now

I took them in this order:

FAR
REG
BEC
AUD

Passed 1-3 on first try.....failed AUD twice....this POS is gonna piss me off....trying to slowly take money out of my wagering accts to focus on studying (after 4/15 I should do my main studies).

lol @ kill myself thread....these rx bastards are not comforting, talk about giving someone that added push

Good luck on your tests bro....i've been out of school so long, im not used to this studying shit...i hope you are young.

Wynn · Apr 2, 2008

I think you need to recognize the gain for book purposes as follows:

<TABLE style="WIDTH: 221pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=294 border=0 x:str><COLGROUP><COL style="WIDTH: 164pt; mso-width-source: userset; mso-width-alt: 7972" width=218><COL style="WIDTH: 57pt; mso-width-source: userset; mso-width-alt: 2779" width=76><TBODY><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; WIDTH: 164pt; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" width=218 height=17>New Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; WIDTH: 57pt; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" width=76 x:num="18950">$ 18,950 </TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Accum Depr - Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="3420">$ 3,420 </TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Gain from Disposition - Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-1445">$ (1,445)</TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-4800">$ (4,800)</TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Cash</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-16125">$ (16,125)</TD></TR></TBODY></TABLE>

BTW, I passed Law, Audit and Tax first and then Practice next.

SundayTiger · Apr 2, 2008

I think the way I have it is correct now. I am off on a couple other accounts, but I do not think they are related to his problem. This problem was one that I was not confident on, but obviously there is something else I am screwing up within the project.

CtGuy441 · Apr 2, 2008

i first thought gain also.

but the problem says - "No Gain or Loss will be recognized
on this transaction.?

CtGuy441 · Apr 2, 2008

shdw01 said:
I took them in this order:

FAR
REG
BEC
AUD

Passed 1-3 on first try.....failed AUD twice....this POS is gonna piss me off....trying to slowly take money out of my wagering accts to focus on studying (after 4/15 I should do my main studies).

lol @ kill myself thread....these rx bastards are not comforting, talk about giving someone that added push

Good luck on your tests bro....i've been out of school so long, im not used to this studying shit...i hope you are young.

thanks man. BOL with audit. i'll get to it eventually.

real young. just finished undergrad in december. want get the exam out of the way as soon as possible

SundayTiger · Apr 2, 2008

How about this one?

June 23
Sold used shop equipment (metal lathe) for $320. The equipment
was purchased at a total cost of $2,200 early in 2004. Using units
of production depreciation, the accumulated depreciation account
balance at the end of the first quarter (March 31) totals $1,830
Depreciation is recorded at the rate of $1.00 for each hour of
operation. Through June 23 of this quarter, an additional 260 hours
of operation have accumulated on the hour meter. Two entries are
required to properly record this sale. At each invoice prompt
enter ASALE for asset sale.

Wynn · Apr 3, 2008

CtGuy441 said:
i first thought gain also.

but the problem says - "No Gain or Loss will be recognized
on this transaction.?

I saw that too, but I think GAAP says recognize the gain.

shdw01 · Apr 3, 2008

Wynn said:
I think you need to recognize the gain for book purposes as follows:

<TABLE style="WIDTH: 221pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=294 border=0 x:str><COLGROUP><COL style="WIDTH: 164pt; mso-width-source: userset; mso-width-alt: 7972" width=218><COL style="WIDTH: 57pt; mso-width-source: userset; mso-width-alt: 2779" width=76><TBODY><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; WIDTH: 164pt; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" width=218 height=17>New Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; WIDTH: 57pt; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" width=76 x:num="18950">$ 18,950 </TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Accum Depr - Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="3420">$ 3,420 </TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Gain from Disposition - Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-1445">$ (1,445)</TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Old Truck</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-4800">$ (4,800)</TD></TR><TR style="HEIGHT: 12.75pt" height=17><TD style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; HEIGHT: 12.75pt; BACKGROUND-COLOR: transparent" height=17>Cash</TD><TD class=xl22 style="BORDER-RIGHT: #d4d0c8; BORDER-TOP: #d4d0c8; BORDER-LEFT: #d4d0c8; BORDER-BOTTOM: #d4d0c8; BACKGROUND-COLOR: transparent" x:num="-16125">$ (16,125)</TD></TR></TBODY></TABLE>

BTW, I passed Law, Audit and Tax first and then Practice next.

what did you use to study? (Esp audit)

CtGuy441 · Apr 3, 2008

SundayTiger said:
How about this one?

June 23
Sold used shop equipment (metal lathe) for $320. The equipment
was purchased at a total cost of $2,200 early in 2004. Using units
of production depreciation, the accumulated depreciation account
balance at the end of the first quarter (March 31) totals $1,830
Depreciation is recorded at the rate of $1.00 for each hour of
operation. Through June 23 of this quarter, an additional 260 hours
of operation have accumulated on the hour meter. Two entries are
required to properly record this sale. At each invoice prompt
enter ASALE for asset sale.

deprec expense 260
accum deprec (260)

cash 320
accum depr 2090
equipment (2200)
gain on sale (210)

shdw01 · Apr 3, 2008

i'm gonna go back to school so that I can have therx do my homework for me.....

CtGuy441 · Apr 3, 2008

Wynn said:
I saw that too, but I think GAAP says recognize the gain.

if its an academic problem then throw GAAP out the window.

but i think you're right. unless there are special circumstances - exchange lacks commerical substance...etc

SundayTiger · Apr 3, 2008

Thanks for all your help

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