Question

On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of boot in this transaction?

Answer 1

There is a loss of 18,000

Step-by-step explanation:

In this question, we are asked to calculate the amount of boot in this transaction.

We proceed as follows;

We must identify that to buy one asset, we exchanged one asset with another

Mathematically;

loss or gain = asset given up - Discount received in exchange

From the question we identify the following;

value of asset given up = 225,000 - 195,000 = 30,000

Discount received in exchange = 12,000

Thus, loss or gain is

= 30,000 - 12,000

So, there's a loss of 18,000