ACCTSol71.pdf - 8 Award 1.00 point A company trades a car...

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8. Award: 1.00 point A company trades a car which cost $22,000 and has accumulated depreciation of $3,000, for a new car which has a list price of $18,600. The dealer allows a $17,500 trade-in, and $1,100 is paid in cash. The car being traded-in could be sold for $17,300 in the well established second-hand market. The new car should be recorded on the books at: $18,400 $18,600 $18,100 $17,000 None of the other alternatives are correct In any exchange of assets, the entry to record the exchange must remove BOTH of the cost of the asset being disposed of and its accumulated depreciation [note: it does not remove the net book value from one account but rather it removes BOTH the cost and accumulated depreciation from their respective accounts] . In most instances, a gain or loss, will be recognized – the difference between the carrying value of the old asset and the fair value of the assets given up, or the asset acquired, whichever is clearly more evident. Accountants make an exception to this rule in certain non-monetary exchanges and a gain is not recognized when the exchange leaves the enterprise’s economic position unchanged. When a
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