China Inn and Midwest Chicken exchanged assets. Midwest Chicken received equipment and gave a delivery truck. The fair value and book value of the delivery truck given were $28,000 and $29,500 (original cost of $35,000 less accumulated depreciation of $5,500), respectively. To equalize market values of the exchanged assets, Midwest Chicken received $8,500 in cash from China Inn.

1. At what amount did Midwest Chicken record the equipment?

2. How much gain or loss did Midwest Chicken recognize on the exchange?