Nash Company exchanged equipment used in its manufacturing operations plus $4,020 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 (cost) $37,520 $37,520

Accumulated depreciation 25,460 13,400

Fair value of equipment 16,750 20,770

Cash given up 4,020

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

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