A printer that cost $600 and has been owned for 2 years is traded in for a new one. Depreciation in the amount of $120 had been taken each year. The new printer has a fair market value of $1,250. A trade-in allowance of $400 is granted, and the balance is paid in cash. The transaction to enter the exchanges of these two assets would result in the recognition of
A) a gain of $40.
B) a loss of $40.
C) a gain of $200.
D) neither a gain nor a loss.

Question

Quizplus · Accepted Answer

The original printer's book value is $360 ($600 - $240 depreciation). The trade-in allowance is $400, resulting in a gain of $40 ($400 - $360).

A Printer That Cost $600 and Has Been Owned for 2