Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000. The new sailboat had an invoice price of $270,000. Hunter received a trade in allowance of $70,000 on the old sailboat, which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat. If this transaction has commercial substance, what amount of gain or loss should be recorded on this exchange?
A. $10,000 gain.
B. $10,000 loss.
C. $60,000 loss.
D. $0 gain or loss.
E. $70,000 loss.
Answer: A
You might also like to view...
How are research and development costs reported in the financial statements? Why is this treatment required?
Which of the following does not describe the continental model of financial reporting?
a. A weak accounting profession b. Strong governmental influence c. The primacy of investor needs over tax influences and creditor needs d. Emphasis of debt financing over equity capital
In high-tech transactions, it can be difficult to determine how much to charge for licensing rights to intellectual property. This situation is best described as one of:
a. unit-one costs. b. creative destruction. c. supply and demand. d. tradeability problems. e. knowledge spillovers.
Marketing professionals are most likely to perceive questionable practices as unethical when:
a. unethical practices are commonplace in the organization. b. there is a short time gap between the action and the onset of negative consequences. c. there is no possibility that the action will result in severe adverse consequences. d. the action is very unlikely to affect many people in the organization.