Nash Co. had a sheet metal cutter that cost $120,000 on January 5, 2010. This old cutter had an estimated life of ten years and a salvage value of $20,000. On April 3, 2015, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Nash also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2014, and that sum-of-the-years digit depreciation method is used.
Instructions:
a. What amount of the gain or loss will be recognized by Nash Co.
b. Prepare all entries that are necessary on April 3, 2015.