Answer:
a. Price (fair market value) of new equipment........................ $275,000
Less trade-in allowance of old equipment........................... 90,000
Cash paid on the date of exchange.................................... $185,000
b. Fair market value (trade-in allowance) of old equipment...... $ 90,000
Less book value of old equipment.................................... 108,500
Loss on exchange of equipment....................................... $ (18,500)
or
Price (fair market value) of new equipment........................ $275,000
Assets given up in exchange:
Book value of old equipment....................................... $108,500
Cash paid on the exchange.......................................... 185,000 293,500
Loss on exchange of equipment....................................... $ (18,500)
