A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000.The company also paid $33,000 cash,along with its old machine to acquire the new machine.If this transaction has commercial substance,the new machine should be recorded at:
A)$40,000.
B)$33,000.
C)$45,000.
D)$18,000.
E)$51,000.

Question

Quizplus · Accepted Answer

The new machine should be recorded at the full invoice price of $45,000 as it represents the fair value of the new asset obtained. The fact that the old machine was traded in and some cash was paid does not change the fact that the new machine was acquired for $45,000.

A Company's Old Machine That Cost $40,000 and Had Accumulated