8.5 Account for the disposal of plant assets
1) Disposal of a plant asset occurs after the asset has been fully depreciated.
2) When an asset is disposed, the current period's depreciation expense account must be updated to the time of the disposal.
3) The first step in recording a disposal transaction is to figure the gain or loss on the disposal.
4) The old truck is an example of what might be debited as "what you got" in a transaction involving an
exchange of assets.
5) Which of the following accounts would be debited as "something you got" in a journal entry for an asset exchange?
A) New truck
B) Old truck
C) Loss on exchange of assets
D) Notes payable
E) Accumulated depreciation - old truck
6) Which of the following accounts would be something credited "as something you gave up" in a journal entry for an asset exchange?
A) Accumulated depreciation - old truck
B) Old truck
C) Loss on exchange of assets
D) Notes receivable
E) New truck
7) What needs to be recorded before the disposal of the asset can be recorded?
8) If an asset is discarded and scrapped for $0 when it has a net book value of $2,000, what is the gain or loss from this disposal?
9) What are the three common ways that an asset can be disposed of?
10) If an asset is being sold or exchanged, what values are compared to compute the gain or loss?