On May 15, 2016, January Company acquired a new forklift in exchange for an old

Question

On May 15, 2016, January Company acquired a new forklift in exchange for an old forklift that it had acquired in 2006. The old forklift was purchased for $20,000 and had a book value of $5,000. On the date of the exchange, the old forklift had a market value of $6,000. In addition, Retread paid $18,000 cash for the new forklift, which had a list price of $25,000. It is expected that future cash flows will not change. At what amount should Retread record the new forklift for financial accounting purposes?

a.

$23,000

b.

$24,000

c.

$20,000

d.

$25,000

a.

$23,000

b.

$24,000

c.

$20,000

d.

$25,000

Explanation / Answer

Amount to be recorded for new forklift for financial accounting purposes = 18000+5000 = $23000 Option A is correct

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