Krasel corporation exchanges old equipment for new equipment. the original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. the new asset received had a fair value of $50,000 and a book value of $45,000. the journal entry to record this exchange will include which of the following entries?

Credit equipment $90,000

Debit accumulated depreciation $70,000

Explanation:

The complete journal entry should be:

Dr Equipment account 50,000

Dr Accumulated Depreciation account 70,000

    Cr Gain on Exchange of Asset account 30,000

    Cr Equipment account 90,000

Explanation:

The new equipment must be recorded at fair market value ($50,000) which results in a net gain = $50,000 - ($90,000 - $70,000) = $30,000

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