Robertson traded in an old plant asset for a newer model that would be more productive and efficient. Data relative to the old and new plant assets follow:
Old Plant Asset
Original cost $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$10,000
Accumulated depreciation of $\quad $ $\quad $7,000
Fair value $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2,000

New Plant Asset
List price $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $13,000

Robertson paid $10,500 cash in the trade. What should be the cost of the new plant asset for financial accounting purposes?

Question

Robertson traded in an old plant asset for a newer model that would be more productive and efficient. Data relative to the old and new plant assets follow: 
Old Plant Asset
Original cost  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$10,000
Accumulated depreciation of  $\quad $ $\quad $7,000
Fair value  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $2,000

New Plant Asset
List price  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $13,000

Robertson paid $10,500 cash in the trade. What should be the cost of the new plant asset for financial accounting purposes?

Quizplus · Accepted Answer

The cost of the new plant asset is calculated by adding the cash paid ($10,500) to the fair value of the old plant asset given up ($2,000), which equals $12,500.

Robertson Traded in an Old Plant Asset for a Newer \quad

Robertson Traded in an Old Plant Asset for a Newer $\quad$