Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $21,500 (original cost of $47,000 less accumulated depreciation of $25,500) and a fair value of $10,900. Kapono paid $39,000 cash to complete the exchange. The exchange has commercial substance.

Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $595,000 and a fair value of $890,000. Kapono paid $69,000 cash to complete the exchange. The exchange has commercial substance.

Required: 1.What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor? 2. Assume the fair value of the old tractor is $33,000 instead of $10,900. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?