When an Entity Sells a Non-Current Asset at a Profit

question 11

Multiple Choice

When an entity sells a non-current asset at a profit to another entity within the same group the following adjustment is necessary on consolidation:

• A)DR Asset CR Cash
• B)DR Cash CR Asset
• C)DR Gain on sale CR Asset
• D)DR Asset CR Gain on sale.

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Definitions:

Maximizing Profit

The process of adjusting inputs and outputs to achieve the highest possible return from business activities.

Identical Firms

Companies in a market that offer products or services that are exactly the same in terms of quality, performance, and price.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the total output.

Total Fixed Costs

The total of all expenses that do not change with the amount of production or level of business operations.