Reference no: EM133088035

Question - DEF Company had the following transactions during 2020. DEF Company has a December 31 fiscal year end.

1. July 1 Purchased land and an old building for a lump sum payment of $100,000 in cash. The intention was to demolish the old building and build a new manufacturing plant. The appraised value (i.e. FMV) of the land was $120,000 and the appraised (i.e. FMV) of the building was $5,000 at the time of acquisition. The old building was demolished at a cost of $2,000 in cash and $1,000 in cash was collected by the sale of the demolished building materials.

2. Dec. 31 An old truck was exchanged for a new drilling machine. Details of the exchange were:

Cost of the old truck (Purchased on January 1, 2014) $8,000

Accumulated depreciation on the old truck (as of January 1, 2020) 4,800

Fair market value of the new drilling machine 2,800

Note: The old truck was being depreciated on a straight-line basis with no salvage value.

The fair market value of the old truck was not known.

Required - Prepare the necessary journal entries to record the above transactions (Show calculations).