alpha Industries Ltd. recently exchanged a piece of manufacturing equipment for another piece of equipment owned by xyz Inc. alpha Industries was required to pay an amount of cash to finalize the exchange. The following information is obtained regarding the exchange:

alpha xyz

Equipment, at cost 25,000 21,000

Accumulated depreciation 5,000 8,000

Fair value of equipment 17,000 19,000

Cash paid 3,000

Required:

a. Prepare the journal entries required by each company to record the exchange, assuming the exchange is considered to have commercial substance.

b. Repeat part (a) assuming the exchange does not have commercial substance.