Willis Bus Service traded in a used bus for a new one. The original cost of the old bus was $52,000. Accumulated depreciation at the time of the trade-in amounted to $34,000. The new bus cost $67,000, but Willis was given a trade-in allowance of $10,000. a. What amount of cash did Willis have to pay to acquire the new bus? b. Compute the gain or loss on the disposal for financial reporting purposes. c. Explain how the gain or loss would be reported in the company's income statement. Solutions a. $57,000 ($67,000 less $10,000 trade-in allowance) b. Trade-in allowance Less: Book value ($52,000 - $34,000) Loss on trade-in $ 10,000 c. The $8,000 loss on trade-in is reported in Willis Bus Service's income statement following the amount of income from operations. (18,000) (8,000)
Willis Bus Service traded in a used bus for a new one. The original cost of the old bus was $52,000. Accumulated depreciation at the time of the trade-in amounted to $34,000. The new bus cost $67,000, but Willis was given a trade-in allowance of $10,000. a. What amount of cash did Willis have to pay to acquire the new bus? b. Compute the gain or loss on the disposal for financial reporting purposes. c. Explain how the gain or loss would be reported in the company's income statement. Solutions a. $57,000 ($67,000 less $10,000 trade-in allowance) b. Trade-in allowance Less: Book value ($52,000 - $34,000) Loss on trade-in $ 10,000 c. The $8,000 loss on trade-in is reported in Willis Bus Service's income statement following the amount of income from operations. (18,000) (8,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Willis Bus Service traded in a used bus for a new one. The
original cost of the old bus was $52,000. Accumulated
depreciation at the time of the trade-in amounted to $34,000.
The new bus cost $67,000, but Willis was given a trade-in
allowance of $10,000.
a. What amount of cash did Willis have to pay to acquire the
new bus?
b. Compute the gain or loss on the disposal for financial
reporting purposes.
c. Explain how the gain or loss would be reported in the
company's income statement.
Solutions
a. $57,000 ($67,000 less $10,000 trade-in allowance)
b. Trade-in allowance
Less: Book value ($52,000 - $34,000)
Loss on trade-in
$ 10,000
c. The $8,000 loss on trade-in is reported in Willis Bus Service's income statement
following the amount of income from operations.
(18,000)
(8,000)
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