A Fixed Asset with a Cost of $52,000 and Accumulated

question 32

Multiple Choice

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books?

• A) $54,000
• B) $59,500
• C) $60,000
• D) $60,500

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Definitions:

Variable Costing

An accounting method that includes only variable costs—those that change with production levels—in the cost of goods sold and inventory valuation.

Unit Product Cost

The total cost associated with producing one unit of a product, including direct materials, direct labor, and allocated overhead.

Segmented Income Statement

An income statement that separates costs and revenues into different segments, departments, or divisions of a business.

Contribution Approach

An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.