If the Carrying Amount of an Asset Equals Its Selling

question 24

Multiple Choice

If the carrying amount of an asset equals its selling price at the date of sale, then

• A)a gain on disposal is recorded.
• B)no gain or loss on disposal is recorded.
• C)the asset is fully depreciated.
• D)a loss on disposal is recorded.

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Definitions:

Residual Dividend Theory

A policy whereby a company pays dividends to shareholders from leftover earnings after all operational costs and capital investment projects are covered.

Operating Income (EBIT)

Refers to an entity's earnings before interest and taxes, calculated by subtracting operating expenses from gross income, indicating the profitability from regular operations.

Payout Ratio

The proportion of earnings a company pays to its shareholders in the form of dividends.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, representing the percentage of tax applied to your income for each tax bracket in which you qualify.