Final answer:
Trade-ins are recorded at the FMV of the old asset.
Step-by-step explanation:
The statement is True. Trade-ins are recorded at Fair Market Value (FMV) of the old asset. When a company trades in an old asset for a new one, it records the trade-in value as the FMV of the old asset. This value is then used to determine the cost basis of the new asset.
For example, let's say a company trades in an old piece of machinery with an FMV of $10,000 for a new piece of machinery worth $15,000. The company would record the trade-in value of $10,000 as the cost basis of the new machinery.
This practice ensures that the company accurately reflects the value of the trade-in transaction in its financial statements.