Asked by Jayesh Reesaul on May 29, 2024
Verified
In an exchange of plant assets that has commercial substance
A) neither gains nor losses are recognized immediately.
B) gains but not losses are recognized immediately.
C) losses but not gains are recognized immediately.
D) both gains and losses are recognized immediately.
Exchange Of Plant Assets
Transactions involving the swap of fixed assets, such as machinery or buildings, between entities, often due to operational needs or upgrades.
Commercial Substance
A concept in accounting indicating that a transaction has caused a significant change in the economic circumstances of a business.
- Examine the impact of revisions in asset valuations and the exchange of assets on financial reports.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
D
Explanation :
In an exchange of plant assets that has commercial substance, both gains and losses are recognized immediately. This is because the new asset received in exchange has a different fair value than the asset given up. The gain or loss is calculated by taking the difference between the fair value of the new asset and the carrying amount of the old asset given up. The gain or loss is recognized immediately on the financial statements.
Learning Objectives
- Examine the impact of revisions in asset valuations and the exchange of assets on financial reports.