Question - Santana Company exchanged equipment used in its manufacturing operations plus $2,340 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) $32,760 $32,760
Accumulated depreciation 22,230 11,700
Fair value of equipment 15,795 18,135
Cash given up 2,340
(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.