Question
1. Lipton Co. acquired equipment by trading used equipment. The cost of the used equipment was $100,000 and the accumulated depreciation was $40,000. The fair
1. Lipton Co. acquired equipment by trading used equipment. The cost of the used equipment was $100,000 and the accumulated depreciation was $40,000. The fair value of the used equipment at the time of the trade was $80,000. The fair value of the equipment that it acquired was $70,000. In addition, Lipton received $10,000 in the trade. Assume the exchange lacks commercial substance. Prepare the journal entry Lipton Co. should make.
2. Now assume that the exchange in question 1 has commercial substance. Assume all other facts in question 1 remain the same. Prepare the journal entry Lipton Co. should make.
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