ExpertMedium1 markMultiple Choice
CPA · Question 24 · Area II: Balance Sheet Accounts
On June 30, Year 1, a company decides to sell a building and classifies it as Held for Sale. <br/>Carrying Value: $800,000<br/>Fair Value: $750,000<br/>Costs to Sell: $30,000<br/><br/>What is the carrying amount of the building on the December 31, Year 1 balance sheet, assuming it is still unsold and fair value hasn't changed?
On June 30, Year 1, a company decides to sell a building and classifies it as Held for Sale. <br/>Carrying Value: $800,000<br/>Fair Value: $750,000<br/>Costs to Sell: $30,000<br/><br/>What is the carrying amount of the building on the December 31, Year 1 balance sheet, assuming it is still unsold and fair value hasn't changed?
Answer options:
A.
$800,000
B.
$750,000
C.
$720,000
D.
$770,000
How to approach this question
Assets Held for Sale are measured at the Lower of Carrying Amount or Fair Value Less Costs to Sell. Also, depreciation stops.
Full Answer
C.$720,000✓ Correct
C
Measure at Lower of Cost ($800,000) or FV less Costs to Sell ($750,000 - $30,000 = $720,000). The value is $720,000.
Common mistakes
Forgetting costs to sell; continuing depreciation.
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