A Lathe Priced at a Fair Market Value of $124,000

question 20

Multiple Choice

A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe. Assuming that the book value of the lathe traded in is $36,000, what is the gain or loss on the exchange?

• A) gain of $9,000
• B) gain of $12,000
• C) loss of $9,000
• D) loss of $12,000

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Definitions:

Ego

In psychoanalytic theory, the part of the personality that mediates between the desires of the id and the constraints of the superego and reality, playing a key role in decision making and behavioral regulation.

Socially Appropriate

Behaviors or actions that are considered acceptable or expected by society or within a specific social context.

Gratified

The feeling of satisfaction or pleasure about having one's desires or needs fulfilled.

Superego

In Freudian psychology, the part of the personality that represents the internalized ideals and provides standards for judgment.