Question

Equipment was acquired for $256,000 and has accumulated depreciation of $187,000. The business exchanges this equipment for new equipment. The new equipment has a market value of $208,000 and the business pays $159,000 cash. Assume the exchange has commercial substance. The exchange results in ________.

Answer 1

exchange results = - $20000 loss

Step-by-step explanation:

given data

acquired = $256,000

accumulated depreciation = $187,000

market value = $208,000

business pays cash = $159,000

to find out

The exchange results

solution

we get exchange results as gain or loss that is calculate as

exchange results = market value - book value of assets exchange - cash paid ..................1

here book value of assets exchange = acquired - accumulated depreciation

book value of assets exchange = $256,000 - $187,000 = $69000

so from equation 1

exchange results = market value - book value of assets exchange - cash

exchange results = $208,000 - $69000 - $159,000

exchange results = - $20000 loss