Question

12. On December 1, 2017, Vaughn Manufacturing acquired new equipment in exchange for old equipment that it had acquired in 2014. The old equipment was purchased for $222000 and had a book value of $88270. On the date of the exchange, the old equipment had a fair value of $97000. In addition, Vaughn paid $292000 cash for the new equipment, which had a list price of $392000. The exchange lacked commercial substance. At what amount should Vaughn record the new equipment for financial accounting purposes?

Answer 1

$389,000

Step-by-step explanation:

Calculation to determine what amount should Vaughn record the new equipment for financial accounting purposes

Equipment Amount

Old Equipment Fair Value $97,000

Cash paid $292,000

Total $389,000

($97,000+$292,000)

Therefore The amount that Vaughn should record the new equipment for financial accounting purposes is $389,000