Lenore Company exchanged machinery with an appraised value of $700,000, a recorded cost of $1,205,000 and accumulated depreciation of $475,000 with Graham Corporation for machinery Graham owns. Grahams machinery has an appraised value of $680,000, a recorded cost of $1,140,000, and accumulated depreciation of $490,000. Graham also gave Lenore $20,000 in cash in the exchange. Assume depreciation has already been updated.

Required:

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

Prepare the entries on both companies books assuming that the transaction is considered to lack commercial substance.