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Equipment that cost $400,000 and has accumulated depreciation of $315,000 is exchanged by ABC Company for another equipment with a fair value of $160,000. In

Equipment that cost $400,000 and has accumulated depreciation of $315,000 is exchanged by ABC Company for another equipment with a fair value of $160,000. In addition, ABC Company received $40,000 in cash. The exchange lacked commercial substance.

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

(b) Prepare the journal entry for the exchange.

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