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. Assuming that Herschel uses the straight-line method of depreciation, if it trades the equipment for new equipment with a list price of $15,500 on December 31, 2011, and pays $4,050 in the exchange, assuming the exchange lacks commercial substance, the new equipment should be recorded at

A) $15,500.
B) $11,450.
C) $9,850.
D) $9,900.