Final answer:
The correct answer to the transaction involving an exchange of assets is C, Equipment (new), as the new asset acquired should be debited. Old machine and Gain on Exchange are credited, and Accumulated Depreciation is debited if it applies to the old machine.
Step-by-step explanation:
When involved in a transaction where assets are exchanged, the accounting entries should reflect the acquisition of the new asset and the disposal of the old asset. In this scenario, we would debit the account that represents the new asset being received. Answer C, Equipment (new), is the correct choice because you would debit the 'Equipment' account for the value of the new machine that you acquired. Answer B, 'Old machine', is incorrect because you would credit this account to remove it from your books. 'Gain on Exchange' (Answer A) would also be credited if there was a gain, and 'Accumulated Depreciation' (Answer D) would be debited if the old machine had accumulated depreciation associated with it, to remove that as well from the accounts.