A printing press priced at a fair market value of $300,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press.
(a) Assuming that the trade-in allowance is $120,000, what is the amount of cash given?
(b) Assuming that the book value of the press traded in is $115,500, what is the gain or loss on the exchange?