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Prepare the journal entries to record the exchange

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Question - Alexandra corp. exchanged equipment that it uses in its manufacturing operations for similar equipment that is used in the operations of Perception Corp. Alexandra also paid Perception $6,000 in cash. The following information pertains to the exchange:

Alexandra

Perception

Equipment cost

100,000

110,000

Accumulated depreciation

62,500

44,000

Fair value of equipment

50,000

56,000

Required -

1. Prepare the journal entries to record the exchange on the books of both companies, assuming a. the exchange is determined to have commercial substance.

2. Repeat part (a), assuming the exchange is determined not to have commercial substance.

3. List some of the factors that the accountant would need to consider in order to determine whether the transaction has commercial substance.

Reference no: EM133131666

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