Use the Following Information for Questions

question 102

Multiple Choice

Use the following information for questions
A machine cost $120,000, has annual depreciation of $20,000, and has accumulated depreciation of $90,000 on December 31, 2006.On April 1, 2007, when the machine has a market value of $27,500, it is exchanged for a machine with a fair value of $135,000 and the proper amount of cash is paid.The exchange lacked commercial substance.
-The gain to be recorded on the exchange is

• A)$0.
• B)$2,500 gain.
• C)$5,000 gain.
• D)$15,000 gain.