GIVEN: On January 1, 2013, Behrend Corp. purchased a weaving machine for $1,800,000. Cost to ship the machine and set it up totaled $100,000. The machine is expected to have a useful life of 5 years and a $400,000 salvage value. The machine is expected to produce 1,500,000 units over its lifetime. During 2013, 320,000 units were produced. During 2014, 400,000 units were produced.

1. Required: Calculate what depreciation expense would be for years 2013 and 2014 under each of the following depreciation methods:

a. Straight-line

2013-

[(1,800,000+ 100,000) -400,000]/ 5= $300,000

2014-

$300,000

FIND: Refer again to the weaving machine depreciated by Behrend under the straight-line method. Assume that Behrend exchanges the machine on 1/1/2015 for a new machine. The new machine has a fair value of $2,000,000 and in addition to its old machine Behrend pays $500,000 in cash. Required: Assuming that the exchange has commercial substance record the exchange using the accounting equation format applying fair value treatment.