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Keeneland Corp. acquired a computer system from Saratoga Co. The computer system has a fair market value of $250,000 and cost Saratoga $400,000. Saratoga has
Keeneland Corp. acquired a computer system from Saratoga Co. The computer system has a fair market value of $250,000 and cost Saratoga $400,000. Saratoga has recorded depreciation of $180,000 on the computer system. In exchange for the computer, Keeneland gave Saratoga a used starting gate with a book value of $150,000 (original cost $250,000 less $100,000 of accumulated depreciation) and $50,000 cash. A) How does each company determine if the exchange has commercial substance? B) What is the cost of the computer system to Keeneland if the exchange has commercial substance? If it lacks commercial substance? C) What is the cost of the starting gate to Saratoga if the exchange has commercial substance? If it lacks commercial substance
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