On January 1, 2010, Herschel Locks Corporation Purchased Drilling Equipment

Multiple Choice

On January 1, 2010, Herschel Locks Corporation purchased drilling equipment for $11,500. The equipment has an estimated useful life of four years and a salvage value of $200. Given this information, if Herschel uses the sum-of-the-years'-digits method of depreciation and then trades the equipment for new equipment with a fair market value of $16,000 on December 31, 2011, and pays $8,000 cash in the exchange, assuming the exchange has commercial substance, the new equipment should be recorded at

A) $16,000.
B) $12,475.
C) $11,590.
D) $8,110.