Concept explainers
Assets Held for Disposal. Hattie Corporation recently decided to dispose of a significant portion of its plant assets The assets to be held for disposal are summarized here:
Description | Machinery* | Equipment* * |
Cost | $696,000 | $1,550,000 |
(348,000) | (620,000) | |
Net book value at year end | $348,000 | $ 930,000 |
*Machinery is depreciated by the straight-line method, assuming a 6-year life with no scrap value. The asset was acquired 3 years ago
**Equipment is deprecated by the straight-line method, assuming a 10-year life with no scrap value.
The asset was acquired 4 years ago
At the time the decision was made to dispose of the assets, the book values of the assets approximated their fair values Assume that costs to sell the assets are zero When the assets were held for disposal, the following changes in fair value occurred.
Subsequent Year | Machinery | Equipment |
End of Year 1 fair value | $200,000 | $900,000 |
End of Year 2 fair value | $215,000 | 950,000 |
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