On 1 January 2020, Larry Ltd decided to trade in equipment that had been acquired by the company at a cost of $55,000 on 1 July 2017. The equipment had been estimated to have a useful life of 5 years (no residual value). The new equipment had a cost of $70,000. Larry Ltd was given a trade-in allowance of $30,000 and paid the balance in cash.

On 1 January 2020, in relation to the trade in of the old equipment, Larry Ltd should recognise in the profit and loss statement a:

Select one:

a.

Gain on trade in of $2,500

b.

Gain on trade in of $8,000

c.

Loss on trade in of $2,500

d.

Gain on trade in of $40,000