An old machine with a book value of $30,000 was traded in on a new similar machine. The new machine, which had a cash price of $120,000, was purchased for $56,000 cash plus the old machine. The cost of the new machine will be $80,000.

Question

Quizplus · Accepted Answer

The cost of the new machine is not $80,000. To find the cost of the new machine, we need to subtract the value of the old machine from the cash price plus the cash paid.

Cash paid = $56,000
Value of old machine = $30,000

Cash price + old machine value = $56,000 + $30,000 = $86,000

Cost of new machine = Cash price + old machine value - trade-in value
Cost of new machine = $86,000 - $30,000 = $56,000

Therefore, the cost of the new machine is $56,000, not $80,000.

An Old Machine with a Book Value of $30,000 Was