Hyde Company Traded in an Old Machine with a Book

question 67

Multiple Choice

Hyde Company traded in an old machine with a book value of $15,000 on a new machine.The exchange did not have commercial substance.The new machine,which had a cash price of $75,000,was purchased for $64,000 cash plus the old machine.Hyde should record the cost of the new machine as

• A) $64,000.
• B) $71,000.
• C) $75,000.
• D) $79,000.

---

Definitions:

Deferred Income Tax Asset

A Deferred Income Tax Asset is an accounting term for items that reduce future tax payments due to temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities.

Consolidated Income Tax

Income tax accounting that includes all income, exemptions, and credits of a consolidated group of companies.

Inventory

The raw materials, work-in-progress products, and finished goods that a company holds for the purpose of sale in the near future.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income level, type of income, or legal jurisdiction.