On January 2, 2007, Quick Delivery Company Traded in an Old

question 64

Multiple Choice

On January 2, 2007, Quick Delivery Company traded in an old delivery truck for a newer model.The exchange lacked commercial substance.Data relative to the old and new trucks follow: $\begin{array}{l}\text { Old Truck }\\\begin{array}{lr}\hline \text { Original cost } & \$ 24,000 \\\text { Accumulated depreciation as of January } 2,2007 & 16,000 \\\text { Average published retail value } & 7,000\end{array}\end{array}$

$\begin{array}{lr}\text { New Truck } & \\\hline \text { List price } & \$ 40,000\\\text { Cash price without trade-in } & 36,000\\\text { Cash paid with trade-in } &30,000 \end{array}$ What should be the cost of the new truck for financial accounting purposes?

• A)$30,000.
• B)$36,000.
• C)$38,000.
• D)$40,000.

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Definitions:

Utility

The total satisfaction received from consuming a good or service; often used in economic analysis to understand consumer behavior.

Auto Repairs

Refers to the maintenance, servicing, and fixing of cars and other vehicles to ensure their proper functioning.

Gasoline

A liquid fuel made from petroleum and used primarily as fuel in internal combustion engines.

Chemical Weathering

The breakdown of rocks and minerals through chemical reactions with atmospheric agents such as oxygen, water, and acids, leading to the formation of new minerals and soil.