sally2707
Sep 13, 2009, 07:05 AM
Let's say
A new machine cost $120,000, has an annual depreciation of $20,000 and has accumulated depreciation of $90,000 on 12/31/06. On April 1, 2007, when the machine has a market value of $27,500, it is exchanged for a machine with a fair market value of $135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.
What is the cost of the new machine
a) 107,500
b)122,500
c) 132,500
d) 135,000
I think you figure out the problem this way:
120,000-90,000=30,000; 27,500-30,000=(2,500); 135,000 -2,500= 132,500
Is this correct?
A new machine cost $120,000, has an annual depreciation of $20,000 and has accumulated depreciation of $90,000 on 12/31/06. On April 1, 2007, when the machine has a market value of $27,500, it is exchanged for a machine with a fair market value of $135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.
What is the cost of the new machine
a) 107,500
b)122,500
c) 132,500
d) 135,000
I think you figure out the problem this way:
120,000-90,000=30,000; 27,500-30,000=(2,500); 135,000 -2,500= 132,500
Is this correct?