Asked by Natalia Smart on May 05, 2024
Verified
If an asset is being sold or exchanged, the gain or loss is always computed by comparing the:
A) market value and cost.
B) book value and salvage value.
C) market value and salvage value.
D) market value and book value.
Market Value
The current price at which an asset or service can be bought or sold in an open market.
Book Value
The book value of an asset is its value on a balance sheet, calculated by subtracting any depreciation, amortization, or impairment costs from its original cost.
Salvage Value
The forecasted residual worth of an asset at the conclusion of its serviceable life.
- Acquire knowledge on how to report the gain or loss on asset disposal in financial statements.
Verified Answer
HT
Haley ThompsonMay 09, 2024
Final Answer :
D
Explanation :
The gain or loss on the sale or exchange of an asset is computed by comparing the asset's market value (or selling price) with its book value. The book value is the asset's original cost minus any accumulated depreciation. This comparison determines whether the company made a profit (gain) or suffered a loss on the sale of the asset.
Learning Objectives
- Acquire knowledge on how to report the gain or loss on asset disposal in financial statements.