When a company replaces a component of property, plant and equipment, which statement below does not account for one of the steps in the process?
A) book value of the replaced component is written off to depreciation expense
B) the asset cost of the replaced component is credited
C) any cost to remove the old component is charged to expense
D) the identifiable direct costs associated with the new component are capitalized

Question

Quizplus · Accepted Answer

The book value of the replaced component is not written off to depreciation expense; instead, it is removed from the asset account and any difference between the book value and the proceeds from disposal is recognized as a gain or loss.

When a Company Replaces a Component of Property, Plant and Equipment