1on january 3, carothers corporation acquired $200,000 in new equipment in exchange for cash of $170,000 cash and a trade-in of old equipment. that old equipment originally cost $180,000 and had accumulated depreciation of $160,000; it had a book value of $20,000 at the time of exchange. this exchange of assets has commercial substance. the cash account will be credited for $170,000. (that credit could not be shown below.) prepare the journal entry.

The journal entry:

Debit Accumulated depreciation $160,000

Debit Equipment $200,000

Credit Cash $170,000

Credit Equipment $180,000

Credit Gain on exchange asset $10,000

Explanation:

The old equipment had a book value of $20,000 at the time of exchange. The company paid $170,000 cash and a trade-in of old equipment.

The new equipment costs of $200,000.

Carothers Corporation will record gain on exchange by the journal entry:

Debit Accumulated depreciation $160,000

Debit Equipment $200,000

Credit Cash $170,000

Credit Equipment $180,000

Credit Gain on exchange asset $10,000

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explanation: