Land, Buildings, and Equipment > Assets Held for Sale Flashcards
The Andrews Company owns a small manufacturing plant that has recently been classified (properly) as held for sale on the company’s balance sheet. Which of the following statements is true?
In some cases but not all, a loss might be recognized at the time of the classification to held for sale is made.
This question has already been answered When an asset, such as this manufacturing plant, qualifies as being held for sale, it should be reclassified
on the owners balance sheet and reported at the lower of book value or net realizable value.
If book value is lower,
there is neither a gain nor loss recognized
If net realizable value is lower
a loss must be recorded to reflect the drop in reported value -
Depreciation of the asset is stopped when it qualifies as
being held for sale.
The Jones Company owns a large warehouse that it plans to sell. What is true?
If Jones does not believe that it is probable that a sale will occur within the next 12 months, the warehouse cannot be reported as being held for sale
To be classified as being held for sale purposes, an asset must meet all of several conditions. These include uf
(a) actively looking for a buyer,
(b) sale is probable within 12 months,
(c) the property is immediately available to the buyer
(d) the sales price is viewed as reasonable
On December 15, Year One, the board of directors of the Wilsson Company passes a resolution to seek a buyer for a warehouse. Company officials believe that it is probable that a buyer will be found and the sale will be completed prior to October 1, Year Two. Which of the following statements is true?
A loss may have to be recognized in Year One in connection with this projected sale.
Authoritative standards identify a number of specific circumstances that could indicate that the value of an asset might have been impaired such as
- a realization that the asset will be disposed of prior to the end of its estimated life,
- costs that were significantly greater than expected,
- and a significant change in the use of the asset
If the expected future cash flows is lower than book value,
the book value would be reduced to the fair value of the asset and a loss recognized.
There is no impairment if
the total amount of expected future cash flows is greater than the book value