A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe.

(a) What is the amount of cash given?
(b) Assuming that the book value of the lathe traded in is $50,000, what is the gain or loss on the exchange?

Question

A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe.
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(a) What is the amount of cash given?
(b) Assuming that the book value of the lathe traded in is $50,000, what is the gain or loss on the exchange?

Quizplus · Accepted Answer

The Answer of A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe.
​
(a) What is the amount of cash given?
(b) Assuming that the book value of the lathe traded in is $50,000, what is the gain or loss on the exchange?

A Lathe Priced at a Fair Market Value of $124,000