Equipment that cost $400,000 and has accumulated depreciation of $315,000 is exchanged by ABC Company for another piece of equipment with a fair value of $160,000. In addition, ABC Company received $40,000 in cash. The exchange lacked commercial substance.

(a) Show the calculation of the gain to be recognized from the exchange.

(b) Prepare the journal entry for the exchange.

Answer rating: 100% (QA)

a Gain to be recognized from the exchange should be computed as follows Book value of the equipment ... View the full answer