A Machine Cost $120,000, Has Annual Depreciation of $20,000, and Has

A machine cost $120,000, has annual depreciation of $20,000, and has accumulated depreciation of $90,000 on December 31, 2007. On April 1, 2008, 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.