On October 1, 2019, Erlich Company purchased a machine for $2600,000. At the time of purchase, Erlich estimated the machine to have a 12-year useful life and a $20,000 salvage value. On January 1, 2023, this machine is exchanged for a new machine with a fair value of $200,000. Erlich also received $50,000 cash in the exchange. The exchanged lacked commercial substance. Erlich depreciates all machines using the straight-line method. December 31st is the fiscal year end.

Required

1. Prepare a detailed calculation of the gain or loss to be recognized from the exchange.

2. Prepare the journal entry to record the exchange.