Assume that the exchange has commercial substance

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1. Nonmonetary Exchange Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment used in the operations of Delaware Company. The following information pertains to the exchange.

Santana Co. Delaware Co.
Equipment (cost) $28,000 $28,000
Accumulated depreciation 19,000 10,000
Fair value of equipment 13,500 15,500
Cash given up 2,000

(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: EM131118131

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