Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries? Credit gain on exchange of asset $4000 Credit equipment $100,000 Debit accumulated depreciation $60,000 Debit equipment $80,000 Debit equipment $65,000 Credit equipment $80,000 Credit accumulated depreciation $60,000

See explanation section

Explanation:

Wall corporation exchanges equipment. Therefore, 1 equipment purchases and another one sells. So, a debit entry and a credit entry for equipment will be needed to record the transaction. Exchanging helps to gain on equipment. The gain amounted to =

Old equipment,

Cost price =                                 $100,000

(-) Accumulated depreciation = $ 60,000  

Book value before exchanging = $40,000

As the company received a new one by exchanging the old equipment,

The gain on equipment -

New equipment =           $80,000

Book value of old one = $40,000

Gain                              =  $40,000

As the company exchanged old equipment, the depreciation related to that old one became a debit entry.

Therefore, the following entry to be recorded -

Debit      Equipment                           $80,000

Debit      accumulated depreciation $60,000

Credit                        Equipment                        $100,000

Credit                        Gain on exchange of asset  40,000