Nonmonetary Exchange

Franklin Company exchanged equipment used in its manufacturing operations plus $44,000 in cash for similar equipment used in the operations of Crowley Company. The following information pertains to the exchange.

Franklin Crowley

Equipment (Cost) $600,000 $480,000

Accumulated Depreciation 360,000 336,000

Fair Value of Equipment 194,000 238,000

Cash Given Up 44,000

Cash Received 44,000

Instructions:

A) Assume that the exchange lacks commercial substance. Prepare the journal

entries to record the exchange on the books of both companies.

B) Assume that the exchange has commercial substance. Prepare the journal entries

to record the exchange on the books of both companies.