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29 November, 07:05

On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of boot in this transaction?

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  1. 29 November, 10:52
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    There is a loss of 18,000

    Explanation:

    In this question, we are asked to calculate the amount of boot in this transaction.

    We proceed as follows;

    We must identify that to buy one asset, we exchanged one asset with another

    Mathematically;

    loss or gain = asset given up - Discount received in exchange

    From the question we identify the following;

    value of asset given up = 225,000 - 195,000 = 30,000

    Discount received in exchange = 12,000

    Thus, loss or gain is

    = 30,000 - 12,000

    So, there's a loss of 18,000
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