A machine cost $300,000, has annual depreciation expense of $60,000, and has accumulated depreciation of $165,000 on December 31, 2020. On that date, the machine has a fair value of $150,000. It is exchanged for a similar machine with a fair value of $360,000 and $210,000 of cash is paid.

Instructions

1. Prepare the entry to record the exchange if it has commercial substance.
2. Prepare the entry to record the exchange if it lacks commercial substance