A company has two divisions: a merchandising division and a construction division. The merchandising division purchases and sells construction equipment. The construction division builds shopping centers.

The company entered into two nonmonetary transactions during the year ended December 31, 20x5:

a. Exchanged construction equipment held in inventory at a cost of $25,000 in exchange for plumbing services on one of the construction contracts. The plumbing services were contracted to cost $43,000. The equipment would normally sell for $46,000. The bookkeeper wrote the following journal entry to record this transaction:

Cost of goods sold - construction division 25,000

Inventory 25,000

b. During 20x4, the company purchased Land 2 at a cost of $2,500,000. On July 2, 20x5, it exchanged 20% (the land was subdivided) of Land 2 for equipment that is to be used in the course of business (i.e. not inventory). The fair value of the land was $600,000 and the fair value of the equipment was $620,000. The bookkeeper was unsure of how to account for this transaction and did not write journal entry. The company's policy is to depreciate equipment using the diminishing balance method at the rate of 15% per year.

Required - For each of the transactions above, prepare the adjusting journal entry/entries required at December 31, 20x5.