Question

Angora Inc. recently sold a gas station, that they were operating for 25 years. They will now have to pay $100,000 to install new gas lines for the future owners. This expense was forseeable when they purchased the gas station 25 years ago. Does the sale of the gas station qualify as the retirement of a tangible long-lived asset??

Answer 1

No, the sale of the gas station does not qualify as the retirement of a tangible long-lived asset.

Step-by-step explanation:

The sale of a gas station, even if it involves a foreseeable expense such as installing new gas lines, does not meet the criteria for the retirement of a tangible long-lived asset. In accounting, the retirement of a tangible long-lived asset typically refers to the removal or disposal of the asset from service without receiving any significant economic return. In this scenario, the sale of the gas station involves a transfer of ownership and is associated with a consideration (the sale price), making it a different financial transaction compared to the retirement of an asset.

While the installation of new gas lines is an expense related to the sale, it does not alter the nature of the transaction as a sale rather than a retirement.