Rogers Co. had a sheet metal cutter that cost $102,000 on January 5, 2010. This old cutter

Question:

Rogers Co. had a sheet metal cutter that cost $102,000 on January 5, 2010. This old cutter had an estimated life of ten years and a salvage value of $15,000. On April 3, 2015, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Rogers also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2014, and that straight-line depreciation is used.

A. Calculate the gain or loss to be recognized by Rogers Co.

B. Prepare all entries that are necessary on April 3, 2015.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...