Question

Terra Corporation purchased equipment with a 10-year useful life and zero residual value for $100,000. At the end of the fourth year, the equipment is exchanged for new equipment worth $110,000. Terra gets a trade-in allowance of $70,000 on the exchange, with the remaining $40,000 paid in cash. Which of the following is true of the net effect of this transaction? Assume the straight-line depreciation method is used. (Select all that apply.)

Answer 1

Step-by-step explanation:

In the question, it is given that the equipment was purchased of $100,000 and the exchange value of the equipment is $110,000 which can increase the balance of the assets account by $10,000 after deducting the $100,000 from the $110,000

Moreover, the total stockholder equity is also increased by $10,000

The other information which is given in the question is not relevant. Hence, ignored it