Principles of Accounting I, what is the answer and solution to problem #2? Thank

Question

Principles of Accounting I, what is the answer and solution to problem #2? Thank you

9/24/2018 CengageNow2 | Online teaching and learning cesource from Cengage Leaming Chap ter ID Qui 1. MC.10-060 A characteristic of a fixed asset is that it is O a. a short-term investment b,held for sale in the ordinary course of the business O c. intangible d. used in the operations of a business 2. MC.10-129.ALGO (Algorithmic) On December 31, Strike Company traded in one of its batting cages for another one that has a cost of $595,040. Strike receives a trade-in allowance of $39,960. The old equipment had an initial cost of $296,000 and has accumulated depreciation of $251,600. Depreciation has been recorded up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction? a. Gain of $39,960 b. Loss of $39,960 c. Loss of $4,440 d. No loss or gain will be recorded O O

Explanation / Answer

Solution 1:

A charactristice of a fixed asset is that it is used in the operations of a business. It is not held for sale in the ordinary course of busines.

Hence option "d" is correct.

Solution 2:

Old equipment cost = $296,000

Accoumulated Depreciation on old equipment = $251,600

Carrying cost of Old equipment = $296000 - $251600 = $44,400

Loss on the transaction = Trade in allowance - Carrying cost of Old equipment = $39960 - $44400 = -$4440.

Hence option "c" is correct.

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