Question

Vaughn Company exchanged equipment used in its manufacturing operations plus $3,540 in cash for similar equipment used in the operations of Bramble Company. 1 information pertains to the exchange. Vaughn Bramble Equipment (cost) Accumulated depreciation $33,040 22,420 $33,040 11,800 Fair value of equipment 14.750 18.290 Cash given up 3.540 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 for the amounts.) Debit Credit Account Titles and Explanation Vaughn Company Bramble Company: 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 tites and enter for the amounts) Debit Credit Account Titles and Explanation Van Company Bramble Coman

Answer 1

Exchange lacks Commercial Substance:
Vaughn Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 14,160
Accumulated Depreciation - Equipment	$ 22,420
Equipment		$ 33,040
Cash		$    3,540
Bramble Company:
Equipment (new)	$ 14,750
Accumulated Depreciation - Equipment	$ 11,800
Cash	$    3,540
Loss on disposal of equipment	$    2,950
Equipment		$ 33,040
Exchange has Commercial Substance:
Vaughn Company:
Account Titles and Explanation	Debit	Credit
Equipment (new)	$ 18,290
Accumulated Depreciation - Equipment	$ 22,420
Equipment		$ 33,040
Cash		$    3,540
Gain on disposal of equipment		$    4,130
Bramble Company:
Equipment (new)	$ 14,750
Accumulated Depreciation - Equipment	$ 11,800
Cash	$    3,540
Loss on disposal of equipment	$    2,950
Equipment		$ 33,040

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