Exchange Intelligent Corporation recently acquired new semiconductor assembly eq

Question

Exchange Intelligent Corporation recently acquired new semiconductor assembly equipment to be used in its production process. Intelligent Corporation traded in old semiconductor equipment that had an original cost of $300,000 and accumulated depreciation on the date of the exchange of $225,000. The fair value of the old equipment is $85,000. In addition, Intelligent Corporation signed a promissory note to pay $200,000 in three years plus interest at a market interest rate of 6%. What is the cost recorded for the new equipment? ____________________________________ What is the gain/(loss) on disposal of the old equipment?

Explanation / Answer

Book Value of old equipment = 300000-225000 = 75000
Cost of new equipment =85000 + [200000+ (200000*.06*3) ]
                      = 85000+ [200000 + 36000]
                     =$ 321000

B)Gain /(loss) on disposal = 85000 - 75000 =10000 gain

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