Reference no: EM132926609

Question - On October 6, 2021, Western Farms Co. traded in an old tractor for a new one, receiving a $XXX trade-in allowance and paying the remaining $XXX in cash. The old tractor cost $XXX, and straight-line depreciation of $XXX had been recorded as of October 6, 2021. Assume the fair value of the new tractor was equal to the trade-in allowance of the old tractor plus the cash paid.

Trade-in allowance $56,650

Cash payment $163,350

Old tractor cost $190,560

Accumulated depreciation - old tractor $105,560

Date of trade-in 2021-10-06

Useful life 5

Company's year-end 2021-12-31

REQUIRED -

a. What is the carrying amount of the old tractor?

b. What amount should be debited to the new Tractor account?

c. What is the gain or loss on the exchange? (show the amount as positive regardless of whether it is a gain or loss)

d. Record the exchange.