Which of the Following Situations Would Not Be Permitted to Defer

question 8

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 an asset?

• A)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.
• B)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.
• C)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.
• D)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.

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Definitions:

Economic Theories

Systems of ideas and principles that explain the functioning of economies and guide the analysis and formulation of economic policies.

Circular-Flow Diagram

An illustrative depiction of the economy demonstrating the circulation of currency among markets, households, and companies.

Firms

Firms are business organizations engaged in industrial, commercial, or professional activities, aiming to generate profits.

Circular Flow Model

An economic model that depicts the continuous flow of money, goods, services, and factors of production between households and businesses in an economy.