Problem:
Looser Co. has a machine that cost $510,000 on March 20, 2011. This old machine had an estimated life of ten years and a salvage value of $30,000. On December 23, 2015, the old machine is exchanged for a new machine with a fair value of $342,000. The exchange lacked commercial substance. Looser also received $36,000 cash. Assume that the last fiscal period ended on December 31, 2014, and that double declining balance depreciation is used.
Instructions:
Question 1: Show the calculation of the amount of gain or loss to be recognized by Looser Co. from the exchange.
Question 2: Prepare all entries that are necessary on December 23, 2015.
Note: Be sure to show how you arrived at your answer.