When purchasing new equip versus keeping old, does the amount of investment include the purchase price AND the residual value of the old (trade-in value), or is it only the cost of the new equipment?

CaptainForest

So from my understanding, you have owned a piece of equipment for 7 years. Now you wish to buy a new one so you go to the store and buy a new piece of equipment for let’s say $3,000 PLUS giving them your old-one that was worth $400?

In which case, the new equipment would be valued at 3,400 since you gave them cash and the value of the old equipment that you could have turned around and sold to someone else instead.

bhet

if what you are talking about is a trade in transaction, the cost of the new equipment that should be recorded is equal to the bookvalue of the old equipment plus cash given off. but if it a separate transaction like,

first transaction:
you sold the equipment.

second transaction:
bought a new equipment.

then the cost equipment plus incedental costs that are directly attributable to putting the asset into its working condition (e.g. cost of installation, freight charges, etc) should be the recorded cost of your new asset.