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When a company exchanges machinery and receives a trade-in allowance less than the book value, this
transaction would be recorded with the following entry:
a. debit Cash and Machinery; credit Accumulated Depreciation
b. debit Cash and Machinery; credit Accumulated Depreciation and Machinery
c. debit Machinery and Accumulated Depreciation; credit Machinery and Cash
d. debit Machinery, Accumulated Depreciation, and Loss on Disposal; credit Machinery and cash

Answer :

Answer:

The correct answer is D

Explanation:

The journal entry would be:

Machinery A/c.......................................Dr     XXXX

Accumulated Depreciation A/c........Dr      XXXX

      Loss on Disposal A/c.............................Cr    XXXX

      Machinery and Cash A/c.......................Cr    XXXX

As the company is exchanging the machinery and receiving the trade in allowance, so will be debiting the machinery and the accumulated depreciation account. And on exchanging had loss as it is less than the book value so the Loss on Disposal account is credited. And the remaining balance will be posted the machinery and the cash account.

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