Question

A truck costs $ 115 comma 000 when new and has accumulated depreciation of $ 85 comma 000. Suppose Jackson Towing exchanges the truck for a new truck. The new truck has a market value of $ 91 comma 000​, and Jackson pays cash of $ 50 comma 000. Assume the exchange has commercial substance. What is the result of this​ exchange?

Answer 1

This is a gain in exchange of $11,000

Step-by-step explanation:

At the point of exchange

Net book value was $30,000 ($115,000 - $85,000)

Exchanged with a fair value of another asset $91,000

But payment made was $50,000

Exchange gain is $41,000 minus NBV of old asset ($30,000)

Total gain is $11,000