When Accounting for Asset Exchanges

question 42

Multiple Choice

When accounting for asset exchanges,

• A) if a transaction lacks commercial substance, it is not recorded.
• B) an asset cannot be recognized at more than its fair value.
• C) if the fair values of either the asset given up or the asset received cannot be ascertained, then the Board of Directors may assign an arbitrary value.
• D) when an exchange lacks commercial substance, either a gain or loss may be recognized.

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Definitions:

Budgeted Financial Statements

Financial statements that predict revenues, expenses, and net income based on the budget for a future period.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, typically used to assess liquidity and manage cash effectively.

Rolling Budget

A continuously updated budget that extends into the future for a consistent period, as current months pass, new months are added to the budget.

Incremental Time Period

A specific duration over which the additional effects of decisions or changes are measured.