Exchange lacked commercial substance

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Edmond Company exchanged machinery with an appraised value of $1,755,000, a recorded cost of $2,700,000 and Accumulated Depreciation of $1,350,000 with Rosen Corporation for machinery Rosen owns. The machinery has an appraised value of $1,695,000, a recorded cost of $3,240,000, and Accumulated Depreciation of $1,782,000. Rosen also gave Edmond $60,000 in the exchange. Assume depreciation has already been updated.

Instructions

a) Prepare the entries on both companies' books assuming that the exchange had commercial substance.

b) Prepare the entries on both companies' books assuming that the exchange lacked commercial substance.

Reference no: EM13152167

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