Question

A copy machine was purchased for $35,000 and had accumulated depreciation of $24,000. The machine was traded in for a new one that had a sticker price of $50,000. The vendor agreed to give a trade-in allowance for the old equipment in the amount of $9,000. How much will the company need to pay in cash, and what is the amount of the gain or loss?a. $41,000, loss of $2,000b. $50,000, no loss or gainc. $50,000, loss of $2,000d. $41,000, gain of $2,000

Answer 1

Answer:

a. $41,000, loss of $2,000

Explanation:

We can compute as follows,

Net book value of copy machine = 35,000 - 24,000 = $11,000

The company got a trade in allowance for $9000 which means that the company made a loss of,

Loss = 11,000 - 9,000 = $2,000

The amount the company needs to pay,

= 50,000 - 9,000 = $41,000

So the company has to pay $41,000 in cash, making a loss of $2,000 on exchange.

Hope that helps.