On December 1, 2013, HC acquired a new delivery truck in exchange for an old delivery truck that it had acquired in 2011. The old truck was purchased for $28,000 and had a book value of $11,200. On the date of the exchange, the old truck had a market value of $12,000. In addition, HC paid $14,000 cash for the new truck, which had a cash price of $32,000. At what amount should HC record the new truck for financial accounting purposes?

Question

Quizplus · Accepted Answer

The cost of the new truck for financial accounting purposes should be recorded at the fair market value of the old truck given up plus any additional cash paid. The fair market value of the old truck is $12,000, and HC paid an additional $14,000 in cash. Therefore, the cost of the new truck for financial accounting purposes is $26,000 ($12,000 + $14,000).

On December 1, 2013, HC Acquired a New Delivery Truck