Which of the Following Situations Would Not Be Permitted to Defer

question 5

Multiple Choice

Which of the following situations would not be permitted to defer the recognition of any recapture that might arise from the disposition of the asset?

• A) A half-ton truck that belonged to a construction company was stolen in 20X0. Insurance proceeds were received which generated recapture. The truck was replaced in 20X1.
• B) A building that was used for income earning purposes was destroyed in a fire. Insurance proceeds were received which generated recapture. A new building was built one and a half years later.
• C) A customized half-ton truck that belonged to a construction company was sold in 20X0. The proceeds from the sale generated recapture. A new customized truck was purchased fourteen months later in order to carry out the duties of a large contract
• Awarded to the company.
• D) A building that was used for income earning purposes was sold in December 20X0. The proceeds from the sale generated recapture. A new building was purchased in April 20X1. The company's fiscal year-end is December 31st.

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Definitions:

Consolidation Elimination

The process of removing intra-group transactions and balances from the consolidated financial statements of a group of companies.

Cost Method

An accounting approach for investments, where the investment is recorded at its acquisition cost without reflecting the investee's performance.

Straight Line Amortization

A technique for distributing the expense of an intangible asset evenly over its lifespan in yearly increments.

Goodwill

The intangible asset that arises when a company acquires another company for more than the fair value of its net identifiable assets.