Southern Company owns a building that it leases to others. The building’s fair value is $2,250,000 and its book value is $1,480,000 (original cost of $2,850,000 less accumulated depreciation of $1,370,000). Southern exchanges this for a building owned by the Eastern Company. The building’s book value on Eastern’s books is $1,630,000 (original cost of $2,450,000 less accumulated depreciation of $820,000). Eastern also gives Southern $225,000 to complete the exchange. The exchange has commercial substance for both companies.
Required:
Prepare the journal entries to record the exchange on the books of both Southern and Eastern.