A company exchanged its used machine for a new machine in a transaction that had commercial substance. The old machine cost $68,000, and the new one had a cash price of $95,000. The company had taken $59,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on the exchange?
What will be an ideal response?
| Market value of machine | $95,000 |
| Book value of old machine ($68,000 - $59,000) | $9,000 |
| Cash | 92,500 | 101,500 |
| Loss | $ 6,500 |
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