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1. Equipment that cost K240,000 and has accumulated depreciation of K189,000 is exchanged forequipment with a fair value of K96,000 and K24,000 cash is received.

1.Equipment that cost K240,000 and has accumulated depreciation of K189,000 is exchanged forequipment with a fair value of K96,000 and K24,000 cash is received. The exchange lackedcommercial substance.

Required:

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

(b)Prepare the journal entry for the exchange. Show a check of the amount recorded for the newequipment.(MARKS 8)

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