Ask Question
31 October, 11:45

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

+1
Answers (1)
  1. 31 October, 14:11
    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 you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers