Q2. ABC Company exchanged equipment used in its manufacturing operations plus $4,500 in cash for similar equipment used in the operations of XYZ Company. The following information pertains to the exchange: (2 Marks)

	ABC	XYZ
Equipment (cost)	$63,000	$63,000
Accumulated Depreciation	42,750	22,500
Fair value of equipment	30,375	34,875
Cash given up	4,500

Required:

i. Calculate gain or loss on exchange.

ii. Prepare the journal entries to record the exchange on the books of both companies when:

a) ABC has commercial substance

b) ABC lacks commercial substance

c) XYZ has commercial substance

d) XYZ lacks commercial substance

Answer: