Beck Company trades in old equipment for new equipment. The old equipment has a cost of $10,000 and accumulated depreciation of $8000. Beck Company pays cash of $24,000. The fair value of the new equipment is $25,000. What is the gain or loss for Beck Company on the exchange of equipment?

Question

Quizplus · Accepted Answer

The gain or loss on the exchange of equipment is calculated as the difference between the fair value of the new equipment and the net book value of the old equipment. The net book value of the old equipment is calculated as the cost of the old equipment minus the accumulated depreciation. In this case, the net book value of the old equipment is $10,000 - $8,000 = $2,000. The gain or loss on the exchange of equipment is therefore $25,000 - $2,000 = $23,000.

Beck Company Trades in Old Equipment for New Equipment