When plant assets are exchanged:
A) the old asset does not need to be removed from the books.
B) the new asset will be debited for the list price of the asset.
C) the gain or loss on the exchange is equal to the difference between the fair value and the book value of the old asset.
D) total assets increase.

Question

Quizplus · Accepted Answer

When a plant asset is exchanged, the gain or loss on the exchange is calculated as the difference between the fair value and the book value of the old asset. The new asset will be debited for the fair value of the asset, not the list price. The old asset must be removed from the books. It is also possible that total assets could increase or decrease depending on the situation, so option D is not necessarily true.

When Plant Assets Are Exchanged