Question: Candy Co . exchanged inventory with Dandy Co . in a transaction that lacks commercial substance. Both Candy s and Dandy s inventory had fair

Candy Co

.

exchanged inventory with Dandy Co

.

in a transaction that lacks commercial substance. Both Candy

s and Dandy

s inventory had fair values that exceeded their costs by

30 % .

Since Dandy

s inventory was more valuable, however, Candy paid Dandy cash to compensate for the difference. Who, if anyone, will recognize a gain on the exchange?

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