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Vet Manager Exam Prep

Category - CVPM

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Animal Medical Center in Los Angeles, California has purchased a new Idexx DR radiograph system at a price of $100,000. They traded in an older digital system that had a book value of $25,000. Assuming that the trade in allowance was $30,000 and that they paid $70,000 cash, what is the cost of this new digital system for the purpose of financial reporting?
  1. $100,000
  2. $95,000
  3. $70,000
  4. $30,000
Explanation
Answer: B-The cost of this new digital system for the purpose of financial reporting is $95,000.The rule of accounting for an exchange of similar assets in which the trade in value exceeds the book value of the old asset requires that the cost of the new asset be determined by adding the amount of cash given ($75,000) to the book value of the old asset ($25,000) for a total value of $95,000.
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