Malone Company Traded in an Old Machine with a Book

question 51

Multiple Choice

Malone Company traded in an old machine with a book value of $15,000 on a new machine. The exchange did not have commercial substance. The new machine, which had a cash price of $75,000, was purchased for $64,000 cash plus the old machine. Malone should record the cost of the new machine as

• A) $64,000.
• B) $71,000.
• C) $75,000.
• D) $79,000.

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Definitions:

Absolute Advantage

The ability of a party to produce more of a good or service than competitors, using the same amount of resources.

Free Trade

The absence of tariffs, quotas, or other governmental restrictions on international trade, allowing goods and services to move freely across borders.

Opportunity Cost

Signifies the advantages that a person, investor, or company forgoes by selecting one option instead of another.

Tables

Arrangements of data in rows and columns that systematically display information.