Teevan Corporation traded a piece of equipment with another company in exchange for another piece of equipment. Details of the exchange are asfollows:

Historical cost of old asset

$330,000

Accumulated depreciation of old asset

$210,000

Fair market value of old asset

$137,500

Fair market value of new asset

$192,500

Cash paid

$55,000

Requirements

a. Record the transaction for Teevan, assuming the exchange has no commercial substance.

b. Record the transaction for Teevan, assuming the exchange has commercial substance.

c. Explain the rationale for the accounting treatment for exchanges without commercial substance.