Bronwyn's Computer Shop Purchased Some New Equipment by Trading in Old

question 8

Multiple Choice

Bronwyn's Computer Shop purchased some new equipment by trading in old equipment with a carrying amount of $10 000. Cash of $8 000 was paid to the supplier and a trade-in allowance of $7 000 was granted. The new equipment should be recorded at:

• A) $7 000.
• B) $8 000.
• C) $10 000.
• D) $15 000.

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Definitions:

Available-For-Sale Securities

These are debt or equity securities purchased with the intent of selling before they reach maturity, but are not actively traded, and are recorded at fair market value on the balance sheet.

Fair Value

Fair value is the estimated market price of an asset or liability, reflecting the amount for which it could be exchanged or settled in a transaction between knowledgeable, willing parties under no compulsion.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenue and expenses to the appropriate period, ensuring accurate financial reporting.

Long-Term Investment

Investments held for an extended period, typically exceeding one year, such as stocks, bonds, or real estate, aiming for prolonged growth.