Equipment that originally cost $220,000 with accumulated depreciation of $100,000 to the date of exchange is traded (exchanged) for equipment with a fair value of $160,000. To even the exchange, $40,000 cash is received. The exchange lacks commercial substance.
1.The gain to be recognized from the exchange is
A)$16,000
B)$20,000
C)$60,000
D)$80,000
E)Some other amount than those shown above.
2.The new equipment should be recorded on the company's books at
A)$160,000.
B)$120,000.
C)$100,000.
D)$96,000.
E)Some other amount than those show above.