Question
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
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:
|
| 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:
- ABC has commercial substance
- ABC lacks commercial substance
- XYZ has commercial substance
- XYZ lacks commercial substance
Please sir, I want the answer clear, I do not want it by hand, I repeat, I do not want the answer by hand.
Answer:
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