Ken Alberts Owned Equipment with an Original Cost of $45,000

question 17

Short Answer

Ken Alberts owned equipment with an original cost of $45,000 with $38,000 of accumulated depreciation. The equipment was traded in on new equipment costing $60,000 with a trade-in allowance of $6,000 and the balance in cash. Determine the following.
a. The book value of the old machine was ________.
b. The loss on the exchange was ________.
c. The cost basis on the books for the new machine, assuming accounting rules, is ________.

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Definitions:

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, forming a new base for future interest calculations.

Mortgage

A type of loan typically used to purchase real estate, where the property itself serves as collateral for the loan.

Monthly Payment

A fixed amount of money paid at regular intervals, typically monthly, for a loan or mortgage.

Trust Fund

A legal entity that holds and manages assets on behalf of another person or group, often used for estate planning or to distribute assets according to the trust creator's wishes.