Athens Inc. exchanged machinery with an appraised value of $ 1,170,000, a recorded cost of $ 1,800,000 and accumulated depreciation of $ 900,000, for machinery that Sparta Corp. owns. Spartas machinery has an appraised value of $ 1,140,000, a recorded cost of $ 2,160,000, and accumulated depreciation of $ 1,188,000. Sparta also gave Athens $ 30,000 in the exchange. Assume depreciation has been updated to the date of exchange.

Required:

a) Prepare the entries on both companies books assuming that the transaction has commercial substance.

b) Prepare the entries on both companies books assuming that the transaction lacks commercial substance.