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Oceanside Enterprises is trading in its old fishing vessel for a new model. The old fishing vessel is on the books at a cost of $364,000 with accumulated depreciation of $314,600. The new fishing vessel has a list price of $538,000 but the manufacturer has agreed to reduce this by $75,000 in return for Oceanside's old fishing vessel.
-The new fishing vessel should be recorded on the books at a cost of:
A)$538,000
B)$512,400
C)$463,000
D)$488,600

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The cost of the new fishing vessel will be the list price of $538,000 minus the trade-in value of $75,000, which equals $463,000. However, since the old fishing vessel has accumulated depreciation, we need to adjust the cost basis of the new vessel by the same amount. The accumulated depreciation on the old vessel is $314,600, so we subtract this from the cost of the new vessel ($463,000 - $314,600), which gives us a cost basis for the new vessel of $148,400. Therefore, the new fishing vessel should be recorded on the books at a cost of $512,400 ($148,400 + $364,000).

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