During the current year, Ewing Company exchanged an old packing machine, which cost P1,200,00 and was 50% depreciated, for another used machine and paid a cash difference of P160,000.

The fair value of the old packing machine was determined to be P700,000.

1. What is the cost of the machine acquired in the exchange?

a. 860,000

b. 700,000

c. 760,000

d. 540,000

2. What is the gain on exchange?

a. 540,000

b. 100,000

c. 60,000

d. 0