USA Trade in Allowance for Asset that is not on the books

[Orestes]

Asset (forklift) originally acquired during acquisition of another business was not entered into the company's fixed asset ledger.

Forklift is now being traded in for a new forklift (like kind exchange).

The trade in allowance is $3k, and cash out is $37k. So, the cost of the new forklift is $40k.

To record the purchase:

DR Forklift - $40K
CR Cash - $37K
CR gain on disposal - $3K

Is this correct?

 

[DTA93433]

Rules of APB Opinion No. 29, as amended by SFAS 153

APB Opinion No. 29
a. does not affect other pronouncements.
b. amended by SFAS No. 153, Exchanges of Nonmonetary Assets, December 2004

Basic Principle (para. 18) --> Applied to all cases other than exceptions
a. Cost of an asset acquired
= Fair value of the asset surrendered
+ Cash (boot) paid
- Cash (boot) received

b. Gain or loss is fully recognized on the exchange.
Gain or loss on exchange
= Fair value of the asset surrendered
- Book value of the asset surrendered

If FV > BV --> Gain
If FV < BV --> Loss