When the Cost of Replacement Property Is Less Than the Amount

question 83

True/False

When the cost of replacement property is less than the amount realized on an involuntary conversion,gain will be recognized.The recognized gain will be equal to the amount realized over the cost of the replacement property,but not more than the total realized gain.

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Definitions:

Spontaneous Financing

Financing that occurs automatically as a firm's operating activities increase, such as trade credit.

Trade Payables

Amounts owed by a company to its suppliers or vendors for goods and services received but not yet paid for.

Revolving Credit Agreement

A credit arrangement that allows a borrower to withdraw, repay, and re-borrow funds up to a specified limit over a set period.

Agreed Limit

An agreed limit refers to a predetermined maximum amount that an insurance company agrees to pay out for a specific claim or coverage.