Question

Cost of original truck traded in - $20,00 dollars Fair market value of original truck at...

Cost of original truck traded in - $20,00 dollars
Fair market value of original truck at trade in date is 4000 dollars
List price of new truck is $25,000
Trade in allowance for old truck is $6000
Business use of both trucks is 100% Compute the basis of new truck?

Homework Answers

Answer #1

The basis of new truck is explaned and calculated is as follows:

Condition for 100% use vehicle

If old vehicle is used 100% for business and sunsequently trade for new vehicle, then the basis in new vehicle is basis in old vehicle plus amount paid for new vehicle.

Basis of new truck = Basis in old truck + Amount paid for new truck

=(Orginal Cost of truck - Trade in allowance for old truck) + Amount paid for new truck

= ($20,000 - $6,000) + $25,000

=$14,000 + $25,000

=$39,000

Basis of new truck of new truck is $39,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cliff Company traded in an old truck for a new one. The old truck had a...
Cliff Company traded in an old truck for a new one. The old truck had a cost of $110,000 and accumulated depreciation of $66,000. The new truck had an invoice price of $48,000. Huffington was given a $38,000 trade-in allowance on the old truck, which meant they paid $10,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?
Willis Bus Service traded in a used bus for a new one. The original cost of...
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.
Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of...
Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of $15,000, and a fair value of $6,000. The new forklift list price is $25,000. A trade-in allowance of $7,000 was given for the old forklift. Which of the following is the correct journal entry to record the exchange? Select one: a. New Equipment 23,000 Accumulated Depreciation 15,000 Old Equipment 20,000 Cash 17,000 Gain on Disposal 1,000 b. New Equipment 38,000 Old Equipment 20,000 Cash...
Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of...
Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of $15,000, and a fair value of $6,000. The new forklift list price is $25,000. A trade-in allowance of $7,000 was given for the old forklift. Which of the following is the correct journal entry to record the exchange? Select one: a. New Equipment 23,000 Accumulated Depreciation 15,000 Old Equipment 20,000 Cash 17,000 Gain on Disposal 1,000 b. New Equipment 38,000 Old Equipment 20,000 Cash...
Unipal Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date...
Unipal Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of $15,000, and a fair value of $6,000. The new forklift list price is $25,000. A trade-in allowance of $7,000 was given for the old forklift. Which of the following is the correct journal entry to record the exchange? Select one: a. New Equipment 38,000 Old Equipment 20,000 Cash 18,000 b. New Equipment 23,000 Accumulated Depreciation 15,000 Old Equipment 20,000 Cash 17,000 Gain on...
Unipal Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date...
Unipal Company exchanged an old forklift with an original cost of $20,000, accumulated depreciation to date of $15,000, and a fair value of $6,000. The new forklift list price is $25,000. A trade-in allowance of $7,000 was given for the old forklift. Which of the following is the correct journal entry to record the exchange? Select one: a. New Equipment 38,000 Old Equipment 20,000 Cash 18,000 b. New Equipment 23,000 Accumulated Depreciation 15,000 Equipment 20,000 Cash 18,000 c. New Equipment...
A printing press priced at a fair market value of $471,700 is acquired in a transaction...
A printing press priced at a fair market value of $471,700 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press. a. Assuming that the trade-in allowance is $207,500, what is the amount of cash given? $_______________ b. Assuming that the book value of the press traded in is $186,800, what is the gain or loss on the...
In June 2018, Sue exchanges a sport-utility vehicle (adjusted basis of $104,320; fair market value of...
In June 2018, Sue exchanges a sport-utility vehicle (adjusted basis of $104,320; fair market value of $130,400) for cash of $19,560 and a pickup truck (fair market value of $110,840). Both vehicles are for business use. Sue believes that her basis for the truck is $110,840. Is Sue correct? Why or why not? Yes . She must treat the transaction as a like-kind exchange . Whats the basis of the new property? Whats Sue's recognized gain of?
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more...
For this and the next question: Truck Parts Company (TPC) has a total market value of...
For this and the next question: Truck Parts Company (TPC) has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $13.40 million, and its tax rate is 15%. TPC can change its capital structure by either increasing its debt to $70 million or decreasing it to $30 million. If it decides to increase its use of leverage,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT