Creek Construction purchased a machine for $26,000.It traded in an old machine and received a $4,200 trade-in allowance.The old machine cost $24,000 and had accumulated depreciation of $16,000 to the date of trade-in.At what value should be new asset be recorded?

Question

Quizplus · Accepted Answer

The cost of the new machine is $26,000, which is the amount Creek Construction paid for it. The trade-in allowance of $4,200 should be subtracted from the cost of the new machine to arrive at the net cost of the new machine, which is $21,800. However, the accumulated depreciation of the old machine should not be taken into account when determining the value of the new machine. Therefore, the value of the new asset should be recorded at $26,000.

Creek Construction Purchased a Machine for $26,000