Answer: $64,700
Explanation:
First calculate the loss incurred from Exchange,
Fair value of New truck is $64,700
Loss= (Fair Value - Cash Price with trade) - (Original Value of old Asset - Accumulated Depreciation )
Loss = (64,700 - 55,000) - (29,500-29,500)
= 9,700 - 0
= $9,700
Gain of $9,700
The cost of the new truck for accounting purposes is,
New truck = (Original Value of Old Asset - Accumulated Depreciation ) + Cash Price With Trade - Loss
Seeing as there was a gain, we add that instead of subtracting loss,
New truck = (29,500-29,500) + 55,000 + 9,700
= 0+ 55,000 + 9,700
= $64,700
Cost of New truck for Financial Accounting Purposes is $64,700.
Next time just use the Cash price without trade-in. The was just to show the basis of it.
