Question

ABC Inc. exchanged an equipment and received $3,000 cash for a similar equipment. The old equipment had a cost of $60,000, accumulated depreciation of $50,000, and fair value of $8,000. Assuming that the exchange has commercial substance, ABC would record the new asset at_________.

Answer 1

ABC would record the new asset at 11,000 dollars.

Step-by-step explanation:

As per accounting standards if the fair value of asset acquired is not measurable then asset acquired shall be recorded at fair value of asset given up plus any amount adjusted by cash. The following accounting entry will be made

Debit New equipment $11,000 (8000 + 3000)

Debit Old equipment AC Depreciation $50,000

Debit Cash $3,000

Credit Old equipment $60,000

Credit Profit and Loss Account $4,000