On December 31, Reach It Batting Cages Company has decided totrade-in one of its

Question

On December 31, Reach It Batting Cages Company has decided totrade-in one of its batting cages for another one that has a costof $500,000. The seller of the batting cage is willing toallow a trade-in amount of $12,000. The initial cost of the oldequipment was $225,000 with an accumulated depreciation of$195,000. Depreciation has been taken up to the end of theyear. The difference will be paid in cash. What is theamount of the gain or loss on this transaction? 2.On June 8, Acme Co. issued an $80,000, 6%, 120-day notepayable to Still Co. Assume that the fiscal year of Acme Co.ends June 30. What is the amount of interest expenserecognized by Acme in the current fiscal year? On December 31, Reach It Batting Cages Company has decided totrade-in one of its batting cages for another one that has a costof $500,000. The seller of the batting cage is willing toallow a trade-in amount of $12,000. The initial cost of the oldequipment was $225,000 with an accumulated depreciation of$195,000. Depreciation has been taken up to the end of theyear. The difference will be paid in cash. What is theamount of the gain or loss on this transaction? 2.On June 8, Acme Co. issued an $80,000, 6%, 120-day notepayable to Still Co. Assume that the fiscal year of Acme Co.ends June 30. What is the amount of interest expenserecognized by Acme in the current fiscal year? 2.On June 8, Acme Co. issued an $80,000, 6%, 120-day notepayable to Still Co. Assume that the fiscal year of Acme Co.ends June 30. What is the amount of interest expenserecognized by Acme in the current fiscal year?

Explanation / Answer

Trade-in AMount rxd in Cash = 12000 Advantage of Trade-In is, it encourages replacement saleswithout altering the list price or the perceived value. So the Net Loss on this Transaction is 30000-12000=18000 whichis the amount which will go as Loss on sale of asset inbooks.
b. Interest expense will be 80000*8%*(30-8)/120 =$1173.33

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