Reference no: EM131930532

As a first year staff member you are assigned to audit the PPE sections of the books. You notice that the company disposed of a brand new dump truck for a used, 2009 4-door sedan. Based on your math, the company lost about $15,000 on the trade. After inquiring further, the accounting manager tells you that the owner traded the truck to his brother's landscaping company for the car as a favor since the landscaping company was undergoing financial hardships. Your client's company recorded the removal of the truck from the PPE account as a total scrap, and the owner of your client company kept the car for himself. He never considered it an asset of his company. How would you explain to the CFO how he should properly record the transaction and why this is required. For the transaction, assume the Dump truck was $45,000 and the 4-door sedan was worth $30,000 (it was a nice car).