You have two clients that are considering trading machinery with each other. 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 clients would prefer that the exchange be deemed to have commercial substance, to allow them to record gains. Here are the facts:
| | Client A | | Client B | | Original cost | | $102,700 | | | $160,000 | | Accumulated depreciation | | 44,000 | | | 83,300 | | Fair value | | 87,100 | | | 115,500 | | Cash received (paid) | | (28,400 | ) | | 28,400 | | | | |
| Record the trade-in on Client As books assuming the exchange has commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation | Debit | Credit | | | | | | | | | | | | | | | | SHOW LIST OF ACCOUNTS | LINK TO TEXT | | | | |
| Record the trade-in on Client As books assuming the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation | Debit | Credit | | | | | | | | | | | | | SHOW LIST OF ACCOUNTS | LINK TO TEXT | | | | |
| Record the entry on Client Bs books assuming the exchange has commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation | Debit | Credit | | | | | | | | | | | | | | | | SHOW LIST OF ACCOUNTS | LINK TO TEXT | | | | |
| Record the entry on Client Bs books assuming the exchange lacks commercial substance. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 48,971.) Account Titles and Explanation | Debit | Credit | | | | | | | | | | | | | | | | | | |