The exchange lacks commercial substance

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Reference no: EM13685974

(Nonmonetary Exchange) Mathews Company exchanged equipment used in its manufacturing operations plus $6,000 in cash for similar equipment used in the operations of Biggio Company. The following information pertains to the exchange.

Mathews Co. Biggio Co.

Equipment (cost) $54,000 $54,000

Accumulated depreciation 36,000 18,000

Fair value of equipment 25,000 31,000

Cash given up 6,000

Instructions

(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: EM13685974

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