Trading in an old delivery van for a new one

Transaction

A company trades in its old delivery van for a new one with a price of $39,000.00. The dealer gives a trade-in allowance of $10,500.00 for the old van, and the company pays the rest in cash. The old van cost $28,000.00 and its accumulated depreciation is $20,000.00.

Assumptions: Depreciation is accumulated in Accumulated Depreciation. The trade-in allowance equals the old van's fair value and the exchange has commercial substance, so the new van is recorded at the cash paid plus that fair value and the gain on the old van is recognized. Depreciation has been recorded up to the date of the trade-in. Sales tax is ignored in this item.