Chapter 5, Problem 5.8DC

Alicia Manufacturing, which owes Pinecrest Ltd. $420,000 in notes payable with accrued interest of $35,000, is experiencing financial difficulties. To settle the debt, Pinecrest agrees to accept from Alicia equipment with a fair value of $390,000, an original cost of $520,000, and accumulated depreciation of $145,000. Requirements: Compute the gain or loss on the transfer of equipment.

Please provide the accurate answer to this general accounting problem using appropriate methods.

What is the cost of unused capacity?