A Fixed Asset with a Cost of $41,000 and Accumulated

question 165

Multiple Choice

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,000, at what cost will the new equipment be recorded in the books?

• A) $54,000
• B) $45,000
• C) $51,000
• D) $50,000

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Definitions:

Required Reserves

This refers to the minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another, potentially leading to an imbalance or unfair advantage.

Creditworthiness

The assessment of a borrower's ability to repay loans based on their financial history, including factors like income, debt levels, and credit score.

Asset Portfolio

A diversified collection of investments held by an individual or institution, which can include stocks, bonds, real estate, and other financial assets.