Question

Carla Company exchanged equipment used in its manufacturing operations plus $3,420 in cash for similar equipment used in the operations of Sarasota Company. The following information pertains to the exchange. Carla Co. Sarasota Co. Equipment (cost) $31,920 $31,920 Accumulated depreciation 21,660 11,400 Fair value of equipment 14,250 17,670 Cash given up 3,420 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 automatically 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.) Account Titles and Explanation Debit Credit Carla Company:

Answer 1

Exchange lacks Commercial Substance:
Carla Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 13,680
Accumulated Depreciation - Equipment	$ 21,660
Equipment		$ 31,920
Cash		$    3,420
Sarasota Company:
Equipment (new)	$ 14,250
Accumulated Depreciation - Equipment	$ 11,400
Cash	$    3,420
Loss on disposal of equipment	$    2,850
Equipment		$ 31,920
Exchange has Commercial Substance:
Carla Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 17,670
Accumulated Depreciation - Equipment	$ 21,660
Equipment		$ 31,920
Cash		$    3,420
Gain on disposal of equipment		$    3,990
Sarasota Company:
Equipment (new)	$ 14,250
Accumulated Depreciation - Equipment	$ 11,400
Cash	$    3,420
Loss on disposal of equipment	$    2,850
Equipment		$ 31,920

If it is helpful, please rate the answer and if any doubt arises let me know