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:

Memory Biases

The tendency for memory to be distorted by previous experiences, desires, or the current emotional state.

Representativeness Heuristic

A belief that outcomes will always reflect characteristics of the process that generated them (e.g., an expectation that the outcome of a series of coin flips will always look random).

Coin Flips

A random process used to generate two equally likely outcomes, typically representing "heads" or "tails."

Framing

The way information is presented or structured, affecting perception and decision-making.