Ask Question
13 February, 20:44

A fixed asset with a cost of $22,535 and accumulated depreciation of $20,282 is traded for a similar asset priced at $60,652. Assuming a trade-in allowance of $5,605, the cost basis of the new asset in a transaction with commercial substance is

a. $60,652

b. $3,352

c. $16,930

d. $5,605

+2
Answers (1)
  1. 13 February, 20:59
    0
    a. $60,652

    Explanation:

    Gain of exchange of similar fixed assets cannot be recognized until new asset's cost is adjusted which will reflect the gain.

    Book value = Cost - Accumulated depreciation = $22,535 - $20,282 = $2,253

    Gain = Trade in Allowance - Book value = $5,605 - $2,253 = $3,352

    Cost of new asset = Price of new asset - unrealized gain = $60,652 - $3,352 = $57,300

    $60,652 basis used with commercial substance
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A fixed asset with a cost of $22,535 and accumulated depreciation of $20,282 is traded for a similar asset priced at $60,652. Assuming a ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers