Question

Exercise 10-19 Ayayai Company exchanged equipment used in its manufacturing operations plus $3,480 in cash for similar equipment used in the operations of Pina Company. The following informa pertains to the exchange. Equipment (cost) Accumulated depreciation Fair value of equipment Cash given up Ayayai Co. $32,480 22,040 14,500 3,480 Pina Co. $32,480 11,600 17,980 Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (Credit account titles are automatic indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Account Titles and Explanation Ayayai Company: Pina Company: SHOW LIST OF ACCOUNTS Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance. (Credit account titles are automatical indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Account Titles and Explanation Ayayai Company Pina Company SHOW LIST OF ACCOUNTS

Answer 1

		Ayayai Co.	Pina Co.
	Fair value of old equipment	14,500	17,980
	Less: Book value of equipment	10,440	20,880
	($32,480 - $22,040), ($32,480 - $11,600)
	Gain or (Loss) on Exchange	4,060	-2,900
	Account Titles and Explanation	Debit	Credit
(The exchange lacks commercial substance)
Ayayai Co.	Equipment (New) (3,480 + 10,440)	13,920
	Accumulated depreciation	22,040
	Cash		3,480
	Equipment (Old)		32,480
Pina Co.	Equipment (New)	14,500
	Accumulated depreciation	11,600
	Cash	3,480
	Loss on exchange	2,900
	Equipment (Old)		32,480
(The exchnage has commercial substance)
Ayayai Co.	Equipment (New) (3,480 + 14,500)	17,980
	Accumulated depreciation	22,040
	Cash		3,480
	Equipment (Old)		32,480
	Gain on exchange		4,060
Pina Co.	Equipment (New)	14,500
	Accumulated depreciation	11,600
	Cash	3,480
	Loss on exchange	2,900
	Equipment (Old)		32,480
Note: Companies recognize a loss immediately whether the exchange has commercial substance or not.