Assume that the following cases are independent and rely on the following data. Make journal entries on the books of both companies. Show all your…

Assume that the following cases are independent and rely on the following data. Make journal entries on the books of both companies. Show all your computations.

Marla Co.: Equipment(cost): 530,000; Accumulated Depreciation: 174,000; Fair Market Value of Equipment 336,000; Cash received(paid): (90,000)

Joe Co.: Equipment(cost): 980,000; Accumulated Depreciation: 630,000; Fair Market Value of Equipment 420,000; Cash received(paid): 90,000

Make Journal Entries:

a.) Marla Co. and Joe Co. traded the above equipment. Assume has commercial substance.

            Marla Co.’s Books:                                       Joe Co.’s Books:

b.) Marla Co. and Joe Co. traded the above equipment. Assume has no commercial substance.

            Marla Co.’s Books:                                       Joe Co.’s Books:

c.) What would be the cost basis of the equipment acquired by Joe Company on their Balance Sheet under no commercial substance in (b) above.

Show all your computations and how you got the numbers.

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