A Company Bought New Heating System for $42,000 and Was

question 119

Multiple Choice

A company bought new heating system for $42,000 and was given a trade-in of $2,000 on an old heating system, so the company paid $40,000 cash with the trade-in. The old system had an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has commercial substance, the company should record the new heating system at:

• A) $43,000.
• B) $40,000.
• C) $2,000.
• D) $42,000.
• E) $3,000.

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Definitions:

Accountant

A professional who performs accounting functions such as audits or financial statement analysis.

Privity

A relationship between two parties that is recognized by law, such as a contractual relationship.

Contractual Relation

The connection between parties that is established by the terms and conditions of a contract.

Parties

Individuals, groups, or entities that are directly involved in a legal transaction or dispute.