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Equipment that originally cost $220,000 with accumulated depreciation of $100,000 to the date of exchange is traded (exchanged) for equipment with a fair value of

Equipment that originally cost $220,000 with accumulated depreciation of $100,000 to the date of exchange is traded (exchanged) for equipment with a fair value of $160,000. To even the exchange, $40,000 cash is received. The exchange lacks commercial substance.

___ 3.

The gain to be recognized from the exchange is

A)

$16,000

B)

$20,000

C)

$60,000

D)

$80,000

E)

Some other amount than those shown above.

___ 4.

The new equipment should be recorded on the company's books at

A)

$160,000.

B)

$120,000.

C)

$100,000.

D)

$96,000.

E)

Some other amount than those show above.

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