PROBLEM 1 On August 1, Barreto Company exchanged a machine for a similar machine owned by Blakey Company and also paid $7,000 cash to Blakey Company. Barreto's machine cost $85,000 when originally...

PROBLEM 1

On August 1, Barreto Company exchanged a machine for a similar machine owned by Blakey Company and also paid $7,000 cash to Blakey Company.  Barreto's machine cost $85,000 when originally purchased and has accumulated depreciation to date of $25,000 and a fair market value of $55,000.  Blakey's machine originally cost $96,000 and has accumulated depreciation to date of $42,000 and a fair value of $62,000.

Prepare the necessary journal entries for Barreto Company and Blakey Company to record this transaction assuming commercial substance.