On February 21, 2021, Prosperous Company exchanged machinery for other machinery owned by Twilight Corporation. Information pertaining to the machinery given up by Prosperous Company in the exchange is as follows:

Cost of machinery given up by Prosperous Company	$152,335
Accumulated depreciation on the machinery given up by Prosperous Company	83,168
Fair value of machinery given up by Prosperous Company	64,400

Information pertaining to the machinery given up by Twilight Corporation in the exchange is as follows:

Cost of machinery given up by Twilight Corporation	$144,620
Accumulated depreciation on the machinery given up by Twilight Corporation	85,325
Fair value of machinery given up by Twilight Corporation	61,800

As part of the exchange, Prosperous Company received $2,600 in cash.

Required:

1. Assuming that the transactionlackscommercial substance, prepare the journal entries to account for the exchange for Prosperous Company and Twilight Corporation. (6 marks)
2. Assuming that the transactionhascommercial substance, prepare the journal entries to account for the exchange for Prosperous Company and Twilight Corporation. (5 marks)

Answer rating: 100% (QA)

Transaction without Commercial Substance For Prosperous Company 1 To record the disposal of old mach... View the full answer