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Equipment that cost $100000 and has accumulated depreciation of $80000 is exchanged for equipment with a fair value of $15000 and $6,000 cash is received.

Equipment that cost $100000 and has accumulated depreciation of $80000 is exchanged for equipment with a fair value of $15000 and $6,000 cash is received. The exchange lacked commercial substance.

Instructions

(a)Show the calculation of the gain to be recognized from the exchange.

(b)Prepare the entry for the exchange. Show a check of the amount recorded for the new equipment.

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