When a depreciable non-current asset is disposed of, which accounting treatment is normally required?
Correct answer: A. Remove its cost and accumulated depreciation from the records
- A. Remove its cost and accumulated depreciation from the records
- B. Transfer its cost directly to retained earnings
- C. Continue depreciation until the sale proceeds are collected
- D. Record the sale proceeds as a liability until year-end
Explanation
Disposal requires derecognition of both the asset's cost and its related accumulated depreciation. Any difference between the net carrying amount and disposal proceeds is recognized as a gain or loss, not deferred merely because collection occurs later.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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