Reporting an Asset Exchange

Clarksten Co. and Kay Inc. exchange equipment. Information related to this exchange for both companies follows.

	Clarksten Co.	Kay Inc.
Equipment given up:
Equipment (original cost)	$18,000	$21,000
Accumulated depreciation	6,000	7,200
Fair value	10,800	14,400
Cash exchanged	(3,600)	3,600

Answer the following questions, rounding your answers to the nearest whole number. a. Record the exchange for Clarksten Co. assuming the transaction has commercial substance. b. Record the exchange for Kay Inc. assuming the transaction has commercial substance. c. Record the exchange for Clarksten Co. assuming the transaction lacks commercial substance. d. Record the exchange for Kay Inc. assuming the transaction lacks commercial substance.

Note: If a line in a journal entry isn't required for a transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero)

• Exchange has commercial substance
• Exchange lacks commercial substance

a.

Account Name	Dr.	Cr.
Equipment (new)
Accumulated Depreciation
Equipment (old)

b.

Account Name	Dr.	Cr.
Cash
Equipment (new)
Accumulated Depreciation
Equipment (old)

c.

Account Name	Dr.	Cr.
Equipment (new)
Accumulated Depreciation
Equipment (old)

d.

Account Name	Dr.	Cr.
Cash
Equipment (new)
Equipment (old)

Please answer all parts of the question.