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A printing press priced at a fair market value of $275,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press. a. Assuming that the trade-in allowance is $90,000, what is the amount of cash given? b. Assuming that the book value of the press traded in is $68,000, what is the gain or loss on the exchange?

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 10, Problem 27E
Textbook Problem
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A printing press priced at a fair market value of $275,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press.

  1. a. Assuming that the trade-in allowance is $90,000, what is the amount of cash given?
  2. b. Assuming that the book value of the press traded in is $68,000, what is the gain or loss on the exchange?

a.

To determine

Determine the amount of cash given.

Explanation of Solution

Exchange of fixed assets: It refers to the purchase of new fixed assets in exchange of old fixed assets. Fixed Assets refer to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue. Examples of fixed assets are Plant, Property, Equipment, Land, and Buildings.

Determine the amount of cash given...

b.

To determine

Determine the gain or (loss) on the exchange of equipment.

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Chapter 10 Solutions

Financial Accounting
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