Topic: You have a client that is considering trading machinery with another company.Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance.Your client would prefer that the exchange be deemed to have commercial substance.Here are the facts:

Round Company

Square Company

Original Cost

$100,000

$150,000

Accumulated Depreciation

45,000

80,000

Fair Value

80,000

120,000

Cash received (paid)

(40,000)

40,000

Requirements: memo to Nash Sheen, the controller of Round Company (your client) indicating and explaining the dollar impact on the financial statements of treating the exchange as having, versus lacking, commercial substance.This memo should be short and to the point; however, you should support any numbers you use (other than the given set of numbers) with calculations.You may opt to put these in a table rather than explaining your calculations in paragraph form.It's okay if the table carries over to the back of the page