In October 2014,Pollock Company Exchanged a Used Packaging Machine Having

question 44

Multiple Choice

In October 2014,Pollock Company exchanged a used packaging machine having a book value of $240,000 for a new machine and paid a cash difference of $30,000.The market value of the used packaging machine was determined to be $280,000.The exchange had commercial substance.In its income statement for the year ended December 31,2014,how much gain should Pollock recognize on this exchange?

• A) $0
• B) $10,000
• C) $30,000
• D) $40,000

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Definitions:

Incremental Overhead Costs

Additional overhead expenses directly resulting from a specific business decision or activity.

Relevant Costs

Costs that should be considered when making decisions because they will be affected by the decision.

Markup Percentage

The percentage difference between the cost of a good or service and its selling price, indicating the gross profit margin.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.