Problem:
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies. Show all computations.
Cowher Co. Hinson Co.
Equipment (cost) $450,000 $825,000
Accumulated depreciation 145,000 450,000
Fair market value of equipment 350,000 350,000
1. Cowher Co. and Hinson Co. traded the above equipment. The exchange has commercial substance.
2. Cowher Co. and Hinson Co. traded the above equipment. The exchange lacks commercial substance.
Assume that the following cases are independent and rely on the following data. Make entries on the books of both companies.
Cowher Co. Hinson Co.
Equipment (cost) $450,000 $825,000
Accumulated depreciation 145,000 525,000
Fair market value of equipment 280,000 350,000
Cash received (paid) (70,000) 70,000
3. Cowher Co. and Hinson Co. traded the above equipment. The exchange has commercial substance.
4. Cowher Co. and Hinson Co. traded the above equipment. The exchange lacks commercial substance.