Exercise 1: Nonmonetary Exchange with No Commercial Substance

Cedric Company recently traded in an older model computer for a new model. The old models book value was $180,000 (original cost of $400,000 less $220,000 in accumulated depreciation) and its fair value was $200,000. Cedric paid $60,000 to complete the exchange, which has no commercial substance.

Required: Prepare the journal entry to record the exchange.