A machine cost $80,000, has annual depreciation expense of $16,000, and has accumulated depreciation of $40,000 on December 31, 2010. On April 1, 2011, when the machine has a fair value of $32,000, it is exchanged for a similar machine with a fair value of $96,000 and the proper amount of cash is paid. The exchange lacked commercial substance.
Instructions
Prepare all entries that are necessary at April 1, 2011.