Exercise 9.7 Accounting for Trade-ins (LO9-5)

Willis Bus Service traded in a used bus for a new one. The original cost of the old bus was $50,900. Accumulated depreciation at the time of the trade-in amounted to $35,400. The new bus cost $77,500 but Willis was given a trade-in allowance of $10,600.

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.