Mark Company Exchanged a Worn-Out Tractor That Had Cost $20

question 5

Short Answer

Mark Company exchanged a worn-out tractor that had cost $20, 000 and was half depreciated for a new tractor with a fair value of $12, 000.Mark paid an additional $2, 500 cash.The transaction lacked commercial substance.
Required:
Compute the amount at which Mark should record the new tractor.

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Definitions:

Process Innovation

The implementation of a new or significantly improved production or delivery method in business operations.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Inverted U-Theory

A hypothesis that suggests a relationship between any given variable and a factor of interest initially increases, reaches an optimal level, then declines.

R&D Expenditures

Refers to spending on research and development activities by governments, businesses, or other organizations to innovate or improve products and services.