Durler Company purchased equipment on January 2, 2015, for $112,000. The equipment had an estimated useful life of 5 years, with an estimated residual value of $12,000. Durler uses straight-line depreciation on all assets. On January 2, 2019, Durler exchanged this equipment, plus $12,000 in cash for newer equipment. The old equipment has a fair value of $50,000.
Accounting
Prepare the journal entry to record the exchange on the books of Durler Company. Assume that the exchange has commercial substance.
Analysis
How will this exchange affect comparisons of the return on assets ratio for Durler in the year of the exchange compared to prior years?
Principles
How does the concept of commercial substance affect the accounting and analysis of this exchange?