On May 15, 2015, January Company acquired a new forklift in exchange for an old forklift that it had acquired in 2005. The old forklift was purchased for $20,000 and had a book value of $5,000. On the date of the exchange, the old forklift had a market value of $6,000. In addition, Retread paid $18,000 cash for the new forklift, which had a list price of $25,000. it is expected that future cash flows will not change. At what amount should Retread record the new forklift for financial accounting purposes?

Question

Quizplus · Accepted Answer

The new forklift should be recorded at its fair value, which is the market value of the old forklift plus the cash paid for the new forklift. The market value of the old forklift is $6,000, and the cash paid for the new forklift is $18,000. Therefore, the fair value of the new forklift is $24,000.

On May 15, 2015, January Company Acquired a New Forklift