On January 2, 2018, Temptations Corporation paid $31,500 in cash and exchanged a chocolate mixing machine, which had a fair value of $437,500 and a book value of $500,000 ($1,135,000 historical cost - $635,000 accumulated depreciation brought up to the date of the transaction) for another chocolate mixing machine from Rascals Candy, Inc. The new mixing machine had a fair value of $469,000 and a book value of $380,000 ($1,500,000 - $1,120,000).

Required

a. Record the journal entry on the books of Temptations Corporation to record the exchange assuming that the transaction altered the economic positions of the parties.

b. Assume that the fair value of the old machine is now estimated at $562,500 and that that new mixing machine had been appraised at $594,000. In addition, the exchange will not materially change the economic positions of the parties to the transaction. Record the journal entry on the books of Temptations Corporation to record the exchange of the machines. All other information remains the same as in part (a).

c. Repeat pan (b) on the books of Rascals Candy. Inc.