Kennedy Company exchanged a warehouse with an appraised value of $1,260,000, a recorded cost of $1,800,000, and Accumulated Depreciation of $900,000 with Stark Corporation for an office building Stark owns. The office building has an appraised value of $1,224,000, a recorded cost of $2,160,000, and Accumulated Depreciation of $1,080,000. Stark also gave Kennedy $36,000 in the exchange.

REQUIRED:

a) Prepare the entries on both companies' books assuming that the transaction is considered to have commercial substance.

b) Prepare the entries on both companies' books assuming that the transaction is considered not to have commercial substance.