A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, the cost basis of the new asset is
A) $54,000
B) $59,500
C) $60,000
D) $60,500

Question

Quizplus · Accepted Answer

The cost basis of the new asset is the trade-in allowance plus the boot received. In this case, the trade-in allowance is $5,000 and the boot received is $60,000 - $52,000 = $8,000. Therefore, the cost basis of the new asset is $5,000 + $8,000 = $60,000.

A Fixed Asset with a Cost of $52,000 and Accumulated