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Prepare the journal entries to record the exchange

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Reference no: EM133132899

Question - Arruza Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of LoBianco Company. The following information pertains to the exchange.

 

Arruza Corporation

LoBianco Corporation

Equipment (Cost)

28,000

28,000

Accumulated Depreciation

19,000

10,000

Fair Value of the Equipment

12,500

15,500

Cash Given Up

3,000

 

Required -

a. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

b. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

Reference no: EM133132899

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