Question

A company exchanges its old office equipment and $80,000 for new office equipment. The old office equipment has a book value of $56,000 and a fair value of $40,000 on the date of the exchange. The cost of the new office equipment would be recorded at

Answer 1

Answer:

cost of the new office equipment would be recorded at $120,000

Explanation:

First of all let us lay out the relevant information:

Book value of old equipment = $56,000

Fair value of old equipment = $40,000

additional exchange fee = $80,000

Cost of new equipment = Fair value + additional exchange fee

= 40,000 + 80,000 = $120,000