Assume that U.S.GAAP and IFRS require firms to remeasure the amount of a particular asset from $12 million to $8 million because of economic events.Which of the following journal entries should the company make?
A)Miscellaneous Expense 4,000,000 Asset 4,000,000
B)Other Comprehensive Income 4,000,000 Miscellaneous Revenue 4,000,000
C)Other Comprehensive Income 4,000,000 Asset 4,000,000
D)Asset 4,000,000 Other Comprehensive Income 4,000,000
E)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

The correct journal entry to record a decrease in the value of an asset due to economic events would typically involve a debit to an expense account (such as impairment loss) and a credit to the asset account to reflect its reduced value. None of the provided options correctly represent this accounting treatment. Options A and D incorrectly use Other Comprehensive Income, which is not used for recording impairment or decreases in asset values due to economic events in this context. Options B and C also incorrectly suggest recording the decrease as income or directly against Other Comprehensive Income, which is not the standard practice for asset revaluation or impairment under U.S. GAAP or IFRS.

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