Krasel Corp. exchanges equipment in a transaction that has commercial substance. The original cost of the asset surrendered was 90,000, and its accumulated depreciation at the date of exchange was 70,000. The asset received had a fair value of 50,000 and a book value of 45,000. The entry to record the transaction includes?
1) Debit Accumulated Depreciation 70,000, Debit Equipment 20,000, Credit Gain on Exchange 40,000, Credit Equipment 90,000
2) Debit Accumulated Depreciation 70,000, Debit Equipment 20,000, Credit Loss on Exchange 40,000, Credit Equipment 90,000
3) Debit Accumulated Depreciation 70,000, Debit Equipment 20,000, Credit Gain on Exchange 40,000, Credit Equipment 50,000
4) Debit Accumulated Depreciation 70,000, Debit Equipment 20,000, Credit Loss on Exchange 40,000, Credit Equipment 50,000