Question

A company bought new heating system for $54,000 and was given a trade-in of $2,400 on an old heating system, so the company paid $51,600 cash with the trade-in. The old system had an original cost of $48,300 and accumulated depreciation of $44,200. If the transaction has commercial substance, the company should record the new heating system at:

a. $2,400.

b. $4,100.

c. $51,600.

d. $54,000.

e. $55,700.

Answer 1

d. $54,000.

Step-by-step explanation:

Since in the question it is mentioned that the transaction has commercial substance which means the new heating system would be recorded at the original cost or the fair market value i.e $54,000

No other adjustments are required i.e old system original cost, accumulated depreciation, etc.

All other information which is given is not relevant. Hence, ignored it