If an Asset Is Exchanged for a Similar Asset, a Gain

question 111

Multiple Choice

If an asset is exchanged for a similar asset, a gain results:

• A) when the book value of the old asset is greater than what is received for the trade-in allowance.
• B) when the book value of the old asset is less than what is received for the trade-in allowance.
• C) when the accumulated depreciation equals the cost of the old asset.
• D) None of the above answers are correct.

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Definitions:

Single Cash-generating Unit

The smallest identifiable group of assets that generates cash flows independently from other assets or groups of assets within an organization.

Goodwill Impairment

An accounting process where the recorded value of goodwill on a company's balance sheet is reduced due to declines in the fair value of the acquired business units.

Recoverable Amount

It is the greater value between an asset's fair value less costs of disposal and its value in use.

Consolidation Worksheet

A tool used in the process of combining the financial statements of the parent company and its subsidiaries to prepare consolidated financial statements.