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Purchase of Computer asset with trade-in allowance

Forum|Forum|1 year ago
February 7, 2025
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I have a small antique business and over the last tax year my iMac (purchased in 2021 for 2,638.34) became unusable at the end of last tax year. The 2019 iMac had accumulated depreciation of $1056 and Apple gave me a trade-allowance of $325 toward a cash purchase of a new 2024 iMac (costing $2742 including Apple Care). I put the new iMac into use in early January 2024. In summary:

2019 cost originally = $2638 put into use in late 2021

Total accumulated depreciation of 2019 iMac = $1056

New 2024 iMac (put into use in January 2024 cost = $2742

Cost allowance for 2019 iMac (completely paid-off) = $325

What would the be journal entry for this transaction and if the accumulated depreciation is part of this journal entry would I need to also account for "asset disposal for the 2019 iMac"?

Thank you for any assistance with this journal entry question.

Bud

QuickBooks Online

Best answer by Rainflurry

@buddy1955

You didn't mention whether you paid cash for the balance due ($2,417) of the 2024 iMac but I will assume you did. If you charged it to your cc, then replace the bank account line with your credit card liability account:

	Debit	Credit
2024 iMac Fixed Asset	2,742
Accumulated Depreciation	1,056
Loss on Disposal of Asset	1,257
2019 iMac Fixed Asset		2,638
Bank Account/CC Liability		2,417

Even better than using a journal entry is to use an Expense (New > Expense) transaction. The line items would look like this:

1) Accumulated Depreciation $1,056

2) New iMac Fixed Asset $2,742

3) Loss on Disposal of Asset $1,257

4) Old iMac Fixed Asset -$2,638

That leaves the total amount as $2,417. Select your bank or credit card as the 'Payment account' and save it. That creates the exact journal entry as the one shown above but it will show under the vendor's account and will show in reports better than a journal entry. Either way works.

RainflurryAnswer