Show the calculation of the amount of gain or loss to be recognized by Susan Co. from the exchange.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Susan Co. has a machine that cost $810,000 on March 20, 2017. This old machine had an estimated life of ten years and a salvage value of $30,000. On December 23, 2021, the old machine is exchanged for a new machine with a fair value of $522,000. The exchange lacked commercial substance. Susan also received $58,000 cash. Assume that the last fiscal period ended on December 31, 2020, and that straight-line
Show the calculation of the amount of gain or loss to be recognized by Susan Co. from the exchange.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
