Answer:
The gain is $17,000
Explanation:
Solution
Recall that:
Hunter sailing Company replaced an oil sailboat for a new one
The cost of the old sailboat =$250,000
The accumulated depreciation = $150,000
The invoice price of new sailboat = $263,000
Trade in allowance received = $116,000
The company old sailboat = $147,000
Now,
Market value of new sailboat = $263,000
Book value of old sailboat= ($250,000 - $150,000) = $100,000
The cash = $147,000
100,000 + 146,000 = $246,000
The gain = $263,000- $246,000 = $17,000
As this transaction lacks commercial substance, the $17,000 gain should not be recognized.
