An old machine with a book value of $20,000 was traded in on a new similar machine. The new machine, which had a cash price of $80,000, was purchased for $62,000 cash plus the old machine. The cost of the new machine was:

Question

Quizplus · Accepted Answer

The cost of the new machine is the cash paid plus the trade-in value of the old machine. The cash paid was $62,000, and the trade-in value of the old machine was $20,000. Therefore, the cost of the new machine is $62,000 + $20,000 = $82,000. But the question asks for the cost of the new machine, not the cost of the new machine plus the trade-in value. The cash price of the new machine is $80,000, so that is the cost of the new machine.

An Old Machine with a Book Value of $20,000 Was