WC purchased an asset that had a list price of $25,000 and a cash price of $22,500. WC paid for this asset by paying $3,750 cash and trading in an old asset that originally cost $37,500 (accumulated amortization to date, $19,000). The two assets are dissimilar. WC should recognize a gain or loss of:

Question

Quizplus · Accepted Answer

The gain is calculated as the difference between the cash price of the new asset and the book value of the old asset. The book value of the old asset is its original cost minus the accumulated amortization. In this case, the book value of the old asset is $37,500 - $19,000 = $18,500. The gain is therefore $22,500 - $18,500 = $250.

WC Purchased an Asset That Had a List Price of $25,000