A machine cost $120,000, has annual depreciation of $20,000, and has accumulated depreciation of $90,000 on December 31, 2015. On April 1, 2016, when the machine has a fair value of $27,500, it is exchanged for a machine with a fair value of $135,000 and the proper amount of cash is paid. The exchange has commercial substance.

The gain to be recorded on the exchange is

Select one:

a. $0.

b. $5,000.

c. $2,500.

d. $15,000.