A company bought a new display case for $42,000 and was given a trade-in of $2,000 on an old display case,so the company paid $40,000 cash with the trade-in.The old case had an original cost of $37,000 and accumulated depreciation of $34,000.The company should record the value of new display case at:
A)$2,000
B)$3,000
C)$40,000
D)$42,000
E)$43,000

Question

Quizplus · Accepted Answer

The company paid $42,000 for the new display case, but received a $2,000 trade-in allowance for the old case. Therefore, the net cost of the new display case is $40,000 ($42,000 - $2,000). The cost of the old display case is irrelevant to the value of the new display case. Therefore, the value of the new display case should be recorded at $42,000, the net cost paid by the company.

A Company Bought a New Display Case for $42,000 and Was