Verez Limited owns 90% of Consior Inc. During 2017, Verez acquired a machine from Consior in exchange for its own used machine. Both companies are in the tool-making business. The agreed exchange amount is $1,000, although the transaction is nonmonetary. Consior has an original cost of $6,000 and carries its machine on its books at a carrying amount of $700, whereas Verez has an original cost of $7,000 and carries its machine on its books at a carrying amount of $900. Neither company has a balance in the Contributed Surplus account relating to previous related-party transactions. Both Verez and Consior follow ASPE.
Instructions
Using the related-party decision tree in Illustration 23-5, prepare the journal entries to record the exchange for both Verez and Consior under the following assumptions.
(a) The transaction is not in the normal course of operations for either company, and the transaction has commercial substance.
(b) The transaction is not in the normal course of operations for either company, and the transaction does not have commercial substance.
(c) The transaction is in the normal course of operations for each company, and the transaction has commercial substance.
(d) The transaction is in the normal course of operations for each company, and the transaction does not have commercial substance.
(e) Briefly explain how your answers to parts (a) through (d) would change if both companies were to follow IFRS.