Arruza Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of LoBianco Company. The following information pertains to the exchange. Arruza Co. LoBianco Co. Equipment (cost) $28,0000 0 $28,0000 Accumulated depreciation 0 19,0000 0 10,0000 Fair value of equipment 0 12,5000 0 15,5000 Cash given up 0 3,0000 0 0 Instructions 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.

Arruza Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of LoBianco Company. The following information pertains to the exchange. Arruza Co. LoBianco Co. Equipment (cost) $28,0000 0 $28,0000 Accumulated depreciation 0 19,0000 0 10,0000 Fair value of equipment 0 12,5000 0 15,5000 Cash given up 0 3,0000 0 0 Instructions 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.

Principles of Accounting Volume 1

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ISBN:9781947172685

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Chapter11: Long-term Assets

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Problem 10PA: Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth...

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Instructions

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.

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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		Arruza Co.		LoBianco Co.
Equipment (cost)		$28,0000	0	$28,0000
Accumulated depreciation	0	19,0000	0	10,0000
Fair value of equipment	0	12,5000	0	15,5000
Cash given up	0	3,0000	0	0