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

question 107

Essay

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.
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(a) What is the amount of cash given?
(b) Assuming that the book value of the lathe traded in is $36,000, what is the gain or loss on the exchange?

Evaluate the financial health of a firm through liquidity ratios such as current ratio and quick ratio.

Assess company performance through margins such as operating profit margin and gross profit margin.

Calculate and interpret financial ratios such as times interest earned ratio, equity multiplier, cash coverage ratio, return on equity, profit margin, quick ratio, current ratio, net working capital turnover, and price earnings growth ratio.

Apply the Du Pont Identity Method for analyzing the components affecting a firm's return on equity.

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Definitions:

Technological Advances

Refers to improvements and innovations in technology that can enhance productivity, efficiency, and quality of life.

Food Production

The process of cultivating plants and raising livestock for the purpose of providing food for consumption.

Per Capita Incomes

The average income earned per person in a certain area in a specified year.

Agricultural Products

Goods derived from agriculture and farming activities, including crops, livestock, and other raw materials.