When a company decides to dispose of a particular line of operation by selling it to another company,the related assets should
A)be written up in anticipation of a gain on disposal.
B)be considered scrap material.
C)be held at historical cost.
D)be written down on the expectation of a loss on disposal.

Question

Quizplus · Accepted Answer

When a company plans to sell a line of operation, it should consider any potential loss on disposal and write down the related assets accordingly. This is in line with the principles of conservatism, which dictate that potential losses should be recognized immediately, whereas gains should only be recognized when realized. Therefore, option D is the best choice.

When a Company Decides to Dispose of a Particular Line