Question

A truck costs $ 128 comma 000 when new and has accumulated depreciation of $ 110 comma 000. Suppose Jake Towing exchanges the truck for a new truck. The new truck has a market value of $ 76 comma 000​, and Jake pays cash of $ 49 comma 000. Assume the exchange has commercial substance. What is the result of this​? exchange?

Answer 1

Jake Towing exchanges gained $9,000

Step-by-step explanation:

Old truck's current value = $128,000 - $110,000 = $18,000

New truck's market value = $76,000

Cash amount paid = $49,000

Total amount paid for the new truck = $49,000 + $18,000 = $67,000

New truck's market value - Total amount paid = $76,000 - $67,000 =$9,000

Jake Towing exchanges bought the new truck for $9,000 less than its market value therefore, It gained $9,000.