If an asset is exchanged for a similar asset, a gain results:

A) when the book value of the old asset is greater than what is received for the trade-in allowance.
B) when the book value of the old asset is less than what is received for the trade-in allowance.
C) when the accumulated depreciation equals the cost of the old asset.
D) None of the above answers are correct.

Trade-in Allowance

The discounted price offered when a customer gives a used item as part of the payment for a new item, reducing the cash cost of the new purchase.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the company's worth.

Gain

A financial increase or profit, particularly from the sale of investments or assets, not typically related to the entity’s primary operations.