On April 1, Year 6, Bob the Builder traded in an equipment with a book value of $2,000 (initial cost $40,000) and paid $50,500 in cash. The old equipment could have been sold for $8,000 at the date of trade-in but was accepted for a trade-in allowance of $9,500 on the new equipment. He estimates that useful life would be 6 years and residual value would be $4,500. On September 1, Year 8, Bob sells this equipment for $35,000. Assume that straight-line depreciation is recognized once at the end of fiscal year (December 31). Assuming Bob adopts half-year convention, what would be gain or loss on the sale of the equipment on September 1, Year 8.
On April 1, Year 6, Bob the Builder traded in an equipment with a book value of $2,000 (initial cost $40,000) and paid $50,500 in cash. The old equipment could have been sold for $8,000 at the date of trade-in but was accepted for a trade-in allowance of $9,500 on the new equipment. He estimates that useful life would be 6 years and residual value would be $4,500. On September 1, Year 8, Bob sells this equipment for $35,000. Assume that straight-line depreciation is recognized once at the end of fiscal year (December 31). Assuming Bob adopts half-year convention, what would be gain or loss on the sale of the equipment on September 1, Year 8.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On April 1, Year 6, Bob the Builder traded in an equipment with a book value of $2,000 (initial cost $40,000) and paid $50,500 in cash. The old equipment could have been sold for $8,000 at the date of trade-in but was accepted for a trade-in allowance of $9,500 on the new equipment. He estimates that useful life would be 6 years and residual value would be $4,500. On September 1, Year 8, Bob sells this equipment for $35,000. Assume that straight-line
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