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Ayayai Company exchanged equipment used in its manufacturing operations plus $3,720 in cash for similar equipment...

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

(a) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.

b.) Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

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