A company decides to exchange its old machine and $154,000 cash for a new machine. The old machine has a book value of $126,000 and a fair value of $140,000 on the date of the exchange. The cost of the new machine would be recorded at

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Business

Darian Blake

10 September, 01:13

A company decides to exchange its old machine and $154,000 cash for a new machine. The old machine has a book value of $126,000 and a fair value of $140,000 on the date of the exchange. The cost of the new machine would be recorded at

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Keyon Fletcher · Answer 1

When two companies exchange an asset, the assets fair value is used as the price of the asset. In this case the company is paying 154,000 plus an old machine with a fair value of 140,000 so the cost of the new machine would be recorded as the sum of the cash paid and fair value of the old asset.

140,000+154,000 = 294,000