Prepare the journal entries assuming commercial substance

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Reference no: EM13824103

Truck Company trades its used delivery trucks for new models at Greenwich GMC. The used trucks have a book value of $60,000 (original cost $140,000 less $80,000 accumulated depreciation). The new trucks have MSRP of $80,000. The fair value of the old trucks based on estimation by third party is $50,000. After some negotiations between the Truck Company and Greenwich GMC, the new trucks would receive $10,000 discount and the trade in value of the old trucks in the amount of $55,000. The remaining portions are to be paid in cash.

Required:

Prepare the journal entries assuming:

a) Commercial substance and

b) No commercial substance.

Reference no: EM13824103

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