Which of the Following Situations Always Results in a Loss

question 131

Multiple Choice

Which of the following situations always results in a loss on derecognition of an asset?

• A) The asset is abandoned.
• B) The cash proceeds from the sale are less than the book value of the asset.
• C) The carrying value of the asset is less than its book value at the time of derecognition.
• D) The cash proceeds from the sale (if any) are less than the acquisition cost of the asset.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Mutual Agency

A principle in partnership where each partner is both an agent and a principal to the partnership, authorized to bind the partnership in contracts and agreements.

Partnership Business

A business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Ease of Formation

Refers to the simplicity and low barriers to legally establishing and starting a new business entity.