Question

A fixed asset with a cost of $52,025 and accumulated depreciation of $44,221 is traded for a similar asset priced at $55,501. Assuming a trade-in allowance of $5,664, the recognized loss on the trade is

Answer 1

$2,140

Step-by-step explanation:

When a commercial substance exists in the course of the exchange of an old asset for a new one , the gain or loss on this assets is recognized,

Commercial substance can be said to exist when the exchange assets impact the future cash flow. The extended useful life of the involved assets in the question the the newly acquired asset through exchange support this.

Workings

Cost of the fixed assets = 52,025

Accumulated depreciation = 44,221

Book value = 7,804

Trade in allowance = 5,664

loss = 7,804 - 5664 = 2,140