Green Co. had a chainsaw that cost $120,000 on January 5 2010. This old chainsaw had an estimated life of ten years and salvage value of $20,000. On April 3, 2015, the old chainsaw with a fair value of $60,000 is exchanged for a new chainsaw. The exchange lacked commercial substance. Assume that the last fiscal period ended on December 31,2014, and that straight-line depreciation is used.
1)Calculate the amount of gain or loss to be recognized by Green Co.
2)Prepare all entries that are necessary on April 3, 2015.
Depreciation under straight line method is calculated as : (Cost – Salvage value)/Useful life
Cost as on Jan 5 2010
Less: Depreciation for 2010
Book value on Dec 31 2010
Less: Depreciation for…