Willis Bus Service traded in a used bus for a new one. The original cost of the old bus was $54,900. Accumulated depreciation at the time of the trade-in amounted to $35,500. The new bus cost $79,500 but Willis was given a trade-in allowance of $10,800.
a. What amount of cash did Willis have to pay to acquire the new bus?
b. Compute the gain or loss on the disposal for financial reporting purposes.
|Cost of old bus||$54,900|
|Less: Accumulated depreciation||($35,500)|
|Book value of old bus||$19,400|
Fair value of old bus = $10,800
Loss on disposal of old bus = (Fair value of old bus - Book value of old bus)
Loss on disposal of old bus = ($10,800-$19,400)
Loss on disposal = ($8,600).
Calculating amount to be paid to acquire new bus:
|Cost of new bus||$79,500|
|Less: Trade in allowance||($10,800)|
|Amount to be paid to acquire new bus||$68,700|
Get Answers For Free
Most questions answered within 1 hours.