D is corrent. According to ASC Topic 360, “A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal group. A gain or loss not previously recognized that results from the sale of a long-lived asset (disposal group) shall be recognized at the date of sale.” In Darnell’s case, the estimate of fair value less cost to sell at December 31, year 2, was $205,000. This amount represents a revision of the estimate of fair value less cost to sell of $200,000 at December 31, year 1. The carrying amount of Darnell’s long-lived assets should be increased from $200,000 to $205,000 at December 31, year 2. Note that the carrying amount of the long-lived assets on December 31, year 1, before recognition of the loss of $40,000, was $240,000. The increase in the carrying amount from $200,000 to $205,000 is, therefore, within the boundaries specified in the standard.
A is incorrect. According to ASC Topic 360, “A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal group. A gain or loss not previously recognized that results from the sale of a long-lived asset (disposal group) shall be recognized at the date of sale.” In Darnell’s case, the estimate of fair value less cost to sell at December 31, year 2, was $205,000. This amount represents a revision of the estimate of fair value less cost to sell of $200,000 at December 31, year 1. The carrying amount of Darnell’s long-lived assets should be increased from $200,000 to $205,000 at December 31, year 2. Note that the carrying amount of the long-lived assets on December 31, year 1, before recognition of the loss of $40,000, was $240,000. The increase in the carrying amount from $200,000 to $205,000 is, therefore, within the boundaries specified in the standard.
B is incorrect. According to ASC Topic 360, “A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal group. A gain or loss not previously recognized that results from the sale of a long-lived asset (disposal group) shall be recognized at the date of sale.” In Darnell’s case, the estimate of fair value less cost to sell at December 31, year 2, was $205,000. This amount represents a revision of the estimate of fair value less cost to sell of $200,000 at December 31, year 1. The carrying amount of Darnell’s long-lived assets should be increased from $200,000 to $205,000 at December 31, year 2. Note that the carrying amount of the long-lived assets on December 31, year 1, before recognition of the loss of $40,000, was $240,000. The increase in the carrying amount from $200,000 to $205,000 is, therefore, within the boundaries specified in the standard.
C is incorrect. According to ASC Topic 360, “A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal group. A gain or loss not previously recognized that results from the sale of a long-lived asset (disposal group) shall be recognized at the date of sale.” In Darnell’s case, the estimate of fair value less cost to sell at December 31, year 2, was $205,000. This amount represents a revision of the estimate of fair value less cost to sell of $200,000 at December 31, year 1. The carrying amount of Darnell’s long-lived assets should be increased from $200,000 to $205,000 at December 31, year 2. Note that the carrying amount of the long-lived assets on December 31, year 1, before recognition of the loss of $40,000, was $240,000. The increase in the carrying amount from $200,000 to $205,000 is, therefore, within the boundaries specified in the standard.
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