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Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hands. The following information

Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hands. The following information for the two warehouses is available:

Denver

Bristol

Cost $100,000 $56,500
Accumulated depreciation 50,000 23,000
Fair value 44,500 44,500

Required:

1. Assuming the exchange has commercial substance, prepare journal entries for Denver and Bristol to record the exchange.
2. Assuming the exchange does not have commercial substance, prepare journal entries for Denver and Bristol to record the exchange.
3. Next Level What is the justification of accounting for the exchange differently when the exchange has commercial substance versus when it does not?

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