Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 10 - Acquisition and Disposition of Property, Plant, and Equipment - Review and Practice - Questions - Page 531: 16

Answer

An exchange of commercial substance applies to a business transaction where the exchange of a purchase consideration and value of product or service received (in this case equipment) shall reflect into a company's cash flow. The value of the given is put up against the value of what was given e.g., purchase of food. On the other hand, an exchange that doesn't have any monetary and nonmonetary value is termed to be transaction without commercial substance. For example, sale and lease back between a business owner and the business.

Work Step by Step

As summarized above.
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