Question

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?

1) Statement A: Determine the cost of the new component
2) Statement B: Remove the old component from the books
3) Statement C: Record the accumulated depreciation of the old component
4) Statement D: Dispose of the old component

Answer 1

Statement D, which refers to the physical disposal of the old component, does not represent an accounting step in the replacement process. The correct accounting steps involve determining the cost of the new component, removing the old component and its accumulated depreciation from the books, and recording the new component at cost.

Step-by-step explanation:

The subject of the question is related to the accounting treatment for replacement of components within the property, plant, and equipment category, which is often covered in financial accounting courses in college.

To answer the student question directly, Statement D: Dispose of the old component does not account for a step in the accounting process when a company replaces a component of property, plant, and equipment.

The correct steps involve determining the cost of the new component (Statement A), removing the cost and the accumulated depreciation of the old component from the books (Statement B and C), and recording the new component at its cost.

While physically disposing of the old component is a practical step, it is not a step in the accounting process.

Option 4.