Question

dodson company traded in a manual pressing machine for an automated pressing machine and gave $14,574 cash. these machines have dissimilar future cash flows. the old machine cost $177,237 and had a net book value of $143,433. the old machine had a fair value of $143,799.what is the amount of gain or loss from this transaction? if you calculate a loss, use a minus sign, i.e. -8000.

Answer 1

Dodson Company realized a gain of $366 from the trade-in of an old manual pressing machine for an automated pressing machine after considering the fair value and net book value of the old machine.

Step-by-step explanation:

The question pertains to a transaction where Dodson Company traded in an old manual pressing machine for an automated one and paid additional cash. To determine the gain or loss from this transaction, we need to compare the fair value of the old machine with its net book value.

The net book value of the old machine is $143,433, while the fair value at the time of the exchange is $143,799. The difference between the fair value and the net book value is calculated as follows:

$143,799 (Fair Value) - $143,433 (Net Book Value) = $366

This results in a gain of $366 from the transaction, since the fair value is higher than the net book value.