Realized gains and losses from sales of assets are measured as
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A. B. C. D.B
Realized gains and losses from sales of assets are measured by comparing the sales price of the asset with its net book value. Net book value represents the carrying value of the asset on the company's balance sheet.
The correct answer is B. sales price of asset less net book value of asset.
Here's a detailed explanation of why this is the correct choice:
A. Fair value of asset less net book value of asset: Fair value represents the estimated market value of an asset. While fair value may be relevant for certain accounting purposes, it is not the appropriate measure for calculating realized gains and losses from sales. Realized gains and losses focus on the difference between the sales price and the asset's carrying value, not its fair value.
B. Sales price of asset less net book value of asset: This is the correct measure for calculating realized gains and losses. The sales price represents the amount received from the sale of the asset, while the net book value represents the carrying value of the asset on the balance sheet. The difference between the sales price and the net book value indicates the realized gain or loss.
C. Net book value less fair value of asset: This answer reverses the order of the calculation. Net book value minus fair value does not provide an accurate representation of the realized gain or loss. The focus should be on the sales price, not the fair value, when calculating realized gains and losses.
D. Sales price of asset less fair value of asset: Similar to choice A, this answer incorrectly includes fair value in the calculation. As mentioned earlier, fair value is not the appropriate measure for determining realized gains and losses. The focus should be on the difference between the sales price and the net book value.
In summary, realized gains and losses from sales of assets are measured by comparing the sales price of the asset with its net book value. The correct answer is B: sales price of asset less net book value of asset.