A Company Exchanged Its Used Machine for a New Machine

question 42

Essay

A company exchanged its used machine for a new machine in a transaction that had commercial substance. The old machine cost $70,000, and the new one had a cash price of $95,000. The company had taken $60,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on the exchange?

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Definitions:

Strategic Alliance

A formal arrangement between two or more parties to pursue a set of agreed-upon objectives while remaining independent organizations.

Vendor

An entity that supplies goods or services to another company, often in a business-to-business (B2B) context.

Partner

An individual or entity that collaborates with another to achieve common goals, often bringing complementary skills or resources to the relationship.

3PL Firms

Third-party logistics providers, or companies that offer outsourced logistics and supply chain management services.