Rapid City traded in a used pickup for a new pickup with a
sticker price of $44,000. The old truck had a historical cost of
$40,000, accumulated depreciation of $16,000, and a fair value of
$27,000. The dealer took the old truck and $13,000 cash for the new
truck.
14. What is the amount of gain/loss that should be reported in the
government-wide financial statements?
a) $0.
b) $3,000 gain.
c) $3,000 loss.
d) $7,000 gain
Need an explanation and formula
Total cost of truck should be reported = Fair value of old pickup + Cash for new truck
= 27,000+13,000
= 40,000
Calculation of book value of old truck:
Book value of old pickup = Historical cost of the old truck - Accumulated depreciation
= 40,000-16,000
24,000
Calculation of gain/loss
Loss on transaction = Book value of old pickup - Fair value on the date of transaction
= 24,000 - 27,000
= -3,000
So the amount of gain should be recognized on this transaction in the government-wide financial statement is 3,000.
Rapid City traded in a used pickup for a new pickup with a sticker price of...