Question: Exercise 9 . 7 Page 4 2 1 Willis Bus Service traded in a used bus for a new one. The original cost of the

Exercise 9.7
Page 421
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. less $10,000 trade-in allowance)
b. Trade-in allowance
$10,000
Less: Book value - $34,000)
(18,000)
Loss on trade-in
(8,000)
c. The $8,000 loss on trade-in is reported in Willis Bus Service's income statement following the amount of income from operations.
Exercise 9.7 Page 421 Willis Bus Service traded in a used

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