Question

Please answer the following: On December 31, Strike Company has decided to sell one of its...

Please answer the following:

On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $247,620.00 with an accumulated depreciation of $222,858.00. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $22,285.80. What is the amount of the gain or loss on this transaction?

Select the correct answer.

a-Loss of $2,476.20

b-Gain of $24,762.00

c-Loss of $24,762.00

d-Gain of $2,476.20

A fixed asset with a cost of $37,635 and accumulated depreciation of $33,872 is traded for a similar asset priced at $54,037 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,487, the cost basis of the new asset is

Select the correct answer.

a-$54,037

b-$53,313

c-$49,550

d-$57,800

A building with an appraisal value of $139,961.00 is made available at an offer price of $152,296.00. The purchaser acquires the property for $37,931.00 in cash, a 90-day note payable for $31,680.00, and a mortgage amounting to $55,547.00. What is the cost basis recorded in the buyer's accounting records to recognize this purchase?

Select the correct answer.

a-$114,365.00

b-$139,961.00

c-$152,296.00

d-$125,158.00

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Homework Answers

Answer #1

1) Book value = cost - accumulated depreciation

= 247,620 - 222,858

=24,762

Selling price = 22,285.80

Therefore loss will be

= 24,762 - 22,285.80

= $2,476.20

Therefore the correct option is A

2) Book value = cost - accumulated depreciation

= 37,635 - 33,872

= 3,763

Trade in allowance = 4,487

Gain = 4,487 - 3,763 = $724

As the transaction is with commercial substance therefore gain will be recorded.

Price of new asset

= Fair market value - gain due to trade in allowance

= 54,037 - 724

= $ 53,313

Therefore the correct option is B

3) Offer price = 152,296

Appraisal value = 139,961

The purchaser will record the asset at the offer price only and on the type of loan or payment he has agreed to made as the interest on the loan will also be capitalised.

Therefore the asset will be recognised at 152,296

Therefore the correct option is C

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