Question

2) The Romeo company exchanged its used bottle capping machine for a new bottle capping machine. The old machine cost $14,000, and the new one had a cash price of $19,000. Romeo had taken $12,000 depreciation on the old machine and was allowed a $500 trade-in allowance, What gain or loss should be recorded on the exchange a) No gain or loss b) $500 gain c) $1,500 loss d) $1,500 gain e) $4,500 gain u inoma ototomonte for 20 and 20x1:

Answer 1

Book value of the machine = $14,000 - $12,000 = $2,000

$2,000 value machine is traded for 500 allowance.

Loss on old machine = $2,000 - $500 = $1,500

Option c) $1,500 loss