Solution-What is justification of accounting for exchange

What is justification of accounting for exchange differently

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Question - Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available:

	Denver	Bristol
Cost	$90,000	$45,000
Accumulated depreciation	55,000	25,000
Fair value	30,000	30,000

Required -

1. Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.

2. Assuming the exchange does not have commercial substance, prepare journal entries for Denver and Bristol to record the exchange.

3. Next Level What is the justification of accounting for the exchange differently when the exchange has commercial substance versus when it does not?

Reference no: EM133146356

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What is justification of accounting for exchange differently

Reference no: EM133146356

Reference no: EM133146356

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