Tamdao Company exchanged machinery with market value of $1,755,000, a recorded cost of $3,000,000 and Accumulated Depreciation of $2,350,000 with Bavi Corporation for machinery Lacey owns. The machinery has an market value of $1,817,000, a recorded cost of $3,250,000, and Accumulated Depreciation of $1,302,000. Tamdao Ltd also gave Bavi Ltd $62,000 in the exchange. Assume depreciation has already been updated.

Required:

(a) Prepare the entries on both companies' books assuming that the exchange had commercial substance. (Round all computations to the nearest dollar). (7 marks)

(b) Prepare the entries on both companies' books assuming that the exchange lacked commercial substance. (Round all computations to the nearest dollar. (7 marks)

(c) What is commercial substance? What can you conclude about the gain or loss from Part a and Part b? (6 marks)