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On November 3, 2020, Gamez 2 Go Media exchanged an old computer for a new computer that

Question:

On November 3, 2020, Gamez 2 Go Media exchanged an old computer for a new computer that had a list price of $190,000. The original cost of the old computer was $150,000 and related accumulated depreciation was $65,000 up to the date of the exchange. Gamez 2 Go Media received a trade-in allowance of $100,000 and paid the balance in cash.


Required

a. Record the exchange assuming the fair values are unknown.

b. Assume that the fair value of the new asset was $174,000. Record the exchange.

Analysis Component: What is the dollar value that will be used to depreciate the new computer in part (b)? Explain which GAAP helped you answer the question correctly.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...
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Related Book For  answer-question
Fundamental Accounting Principles Volume I

Fundamental Accounting Principles Volume I

ISBN: 978-1260305821

16th Canadian edition

Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann

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Related Video

Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.

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