A Company Exchanged Its Used Machine for a New Machine

question 62

Essay

A company exchanged its used machine for a new machine in a transaction that had commercial substance.The old machine cost $68,000,and the new one had a cash price of $95,000.The company had taken $59,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash.What gain or loss should be recorded on the exchange?

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Definitions:

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine the relative value of the currencies.