Carlos Arruza Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of Tony LoBianco Company. The following information pertains to the exchange.

Carlos Arruza Co Tony LoBianco Co.

Equipment $28000 $28000

Accumulated Depreciation 19000 10000

Fair Value of Equipment 12500 15500

Cash given up 3000

Instructions (a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

(b) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercialsubstance.