Nonmonetary Exchange Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar

Question:

Nonmonetary Exchange Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment used in the operations of Delaware Company. The following information pertains to the exchange.

Santana Co. Delaware Co.

Equipment (cost) $28,000 $28,000

Accumulated depreciation 19,000 10,000

Fair value of equipment 13,500 15,500

Cash given up 2,000

(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

(b) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

Depreciation
Depreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing...