Question

Ayayai Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment used in the operations of Pina Company. The following information pertains to the exchange.

		Ayayai Co.			Pina Co.
Equipment (cost)		$34,720			$34,720
Accumulated depreciation		23,560			12,400
Fair value of equipment		15,500			19,220
Cash given up		3,720

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 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Ayayai Company:
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
Pina Company:
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

eTextbook and Media

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 automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Ayayai Company
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
Pina Company
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount

Answer 1

Answer
1. exchange lacks commercial substance
In the books of Ayayai Co.
Account title	Debit	Credit
Equipment (New)	$     14,880
Acc.Dep	$     23,560
Cash		$     3,720
Equipment (Old)		$   34,720
			In the books of Pina Co.
Account title	Debit	Credit
Cash	$       3,720
Acc.Dep	$     12,400
Equipment (new)	$     18,600
Equipment (Equipment old)		$   34,720

2.exchange has commercial substance
In the books of Ayayai Co.
Account title	Debit	Credit
Equipment (New)	$     19,220
Acc.Dep (Old)	$     23,560
Cash		$     3,720
Equipment (Old)		$   34,720
Gain on exchange of asset		$     4,340
In the books of Pina Co.
Account title	Debit	Credit
Cash	$       3,720
Acc.Dep (Old)	$     12,400
Equipment (New)	$     15,500
Loss on exchange of asset	$       3,100
Equipment (Old)		$   34,720
Please Like ( Positive Rating )