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

Instructions
(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.
(b) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

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Carlos Arruza Co Tony LoBianco Co. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up $28,000 19,000 12,500 3,000 $28,000 10,000 15,500