An entity acquired an item of machinery in exchange for a motor vehicle. The carrying amount of the machinery is $8000 and its fair value is $10 000. The journal entry to record the acquisition of the machinery will include:

A) a loss on acquisition of $2000.
B) a gain on sale of $2000.
C) proceeds on sale of motor vehicle of $2000.
D) proceeds on sale of machinery of $2000.

Carrying Amount

The book value of assets and liabilities, calculated as the original cost minus any accumulated depreciation, impairment, or amortization.

Fair Value

The expected proceeds from an asset sale or the financial commitment for a liability shift in an orderly engagement among market participants at the time of determining value.

Loss on Acquisition

A financial loss that occurs when the cost to acquire a company or asset exceeds its fair value.