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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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How does a company account for the disposal of an asset? How does it report gains and losses on its financial statements?

To determine

Describe the way in which a company would account for the disposal of an asset and state the manner in which the company would report the gains and losses on its financial statements.

Explanation

Disposal of Assets:

Disposal is an activity of selling the worn-out assets that is no longer in need for the business, in return of some consideration. Disposal may be made in any of the following situations:

  • Disposal with no gain no loss: When the asset is disposed of with no consideration received.
  • Disposal with gain: When the asset is disposed of for more than its book value (original cost less accumulated depreciation).
  • Disposal with loss: When the asset is disposed of for less than its book value...

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