Beck Company trades in old equipment for new equipment.The old equipment has a cost of $10,000 and accumulated depreciation of $9,000.Beck Company pays cash of $21,000.The fair value of the new equipment is $28,000.What is the gain or loss for Beck Company on the exchange of equipment?

Question

Quizplus · Accepted Answer

Book Value = $10,000 - $9,000 = $1,000
Implied Fair value of old equipment =
Fair value new equipment $28,000 - Cash paid $21,000 = $7,000
Loss = $7,000 - $1,000 = $6,000
Loss = Fair value old equipment - Book value old equipment

Beck Company Trades in Old Equipment for New Equipment