Apha Limited acquired the net assets of Beta Limited. Alpha Limited provided an item of equipment as part of the consideration. The fair value of the equipment was $26 000. It cost $40 000 and had a carrying amount of $24 000. Which of the following entries appropriately reflects the gain or loss on the equipment?
A) DR Loss on sale $2000
B) CR Loss on sale $2000
C) CR Gain on sale $2000
D) Dr Gain on sale $2000.

Question

Quizplus · Accepted Answer

The gain on the sale of the equipment is calculated as the fair value ($26,000) minus the carrying amount ($24,000), which equals $2,000. This results in a gain, not a loss, so it should be credited.

Apha Limited Acquired the Net Assets of Beta Limited