Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Sale of Plant Assets

Financial Accounting

8. Long Lived Assets

Sale of Plant Assets

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Multiple Choice

Which of the following situations will result in recognizing a gain on the sale of a plant asset?

The asset is sold for less than its book value.

The asset is sold for more than its book value.

The asset is exchanged for another asset of equal book value.

The asset is sold for exactly its book value.

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Verified step by step guidance

Step 1: Understand the concept of 'book value' in financial accounting. The book value of an asset is its original cost minus accumulated depreciation. It represents the value of the asset as recorded in the accounting books.

Step 2: Recognize that a gain on the sale of a plant asset occurs when the selling price of the asset exceeds its book value. This is because the company receives more than the recorded value of the asset, resulting in a financial gain.

Step 3: Analyze each situation provided in the problem: (a) If the asset is sold for less than its book value, it results in a loss, not a gain. (b) If the asset is sold for exactly its book value, there is no gain or loss. (c) If the asset is exchanged for another asset of equal book value, no gain or loss is recognized because the transaction is equal in value.

Step 4: Focus on the situation where the asset is sold for more than its book value. This is the only scenario that results in recognizing a gain on the sale of the plant asset.

Step 5: Conclude that the correct answer is: 'The asset is sold for more than its book value,' as this situation aligns with the definition of recognizing a gain in financial accounting.