A company bought new heating system for $42,000 and was given a trade-in of $2,000 on an old heating system, so the company paid $40,000 cash with the trade-in. The old system had an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has commercial substance, the company should record the new heating system at:

Question

Quizplus · Accepted Answer

The new heating system should be recorded at its cash price of $42,000, as the transaction has commercial substance and the trade-in value is already accounted for in the cash paid.

A Company Bought New Heating System for $42,000 and Was