Question

Sun Company exchanged equipment used in its manufacturing operations plus $3,240 in cash for similar equipment used in the operations of Teal Company. The following information pertains to the exchange. Sun Co. Teal Co. Equipment (cost) $30,240 $30,240 Accumulated depreciation 20,520 10,800 Fair value of equipment 13,500 16,740 Cash given up 3,240 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 Sun 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 Teal 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 SHOW LIST OF ACCOUNTS LINK TO TEXT 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 Sun 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 Teal 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

Answer 1

Answer
Lacks commercial substance:
Sun company:
Account Title	Debit	Credit
Equipment(new)	$     12,960
Accumulated Depreciation	$     20,520
Equipment(old)		$     30,240
Cash		$       3,240
Teal Co.
Equipment(new)	$     13,500
Accumulated Depreciation	$     10,800
Cash	$       3,240
Loss on exchange	$       2,700
Equipment(old)		$     30,240
Has commercial substance:
Sun company:
Account Title	Debit	Credit
Equipment(new)	$     16,740
Accumulated Depreciation	$     20,520
Equipment(old)		$     30,240
Cash		$       3,240
Gain on exchange		$       3,780
Teal Co.
Equipment(new)	$     13,500
Accumulated Depreciation	$     10,800
Cash	$       3,240
Loss on exchange	$       2,700
Equipment(old)		$     30,240