Fundamental Accounting Principles Study Set 5
Quiz 10: Long-Term Assets
Accounting for the Exchange of Assets Depends on Whether the Transaction
Accounting for the exchange of assets depends on whether the transaction has commercial substance; commercial substance implies that it alters the company's future cash flows.
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If an asset is sold above its carrying amount, the selling company records a loss.
Gain or loss on the disposal of assets is determined by comparing the disposed asset's carrying amount to the value of any assets received.
A loss on disposal of an item of property, plant and equipment occurs if the cash proceeds received from the asset sale is less than the asset's carrying amount.
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