Property, Plant and Equipment assets remain on the business’s accounting books until they are disposed of. Companies dispose of property, plant and equipment assets which are no longer useful for the company. Eventually, a long-lived asset wears out or becomes obsolete. When plant assets are no longer useful because they have physically deteriorated or become obsolete, a company can dispose them by discarding, selling them for cash, or exchanging them for a new long-lived asset. The disposal of property, plant and equipment assets can take one of three forms:

• Discard (retire) the long-lived asset.
• Sell the long-lived asset for cash.
• Exchange the long-lived asset for another long-lived asset.

Discarding (retiring) of property, plant and equipment assets involve disposing of the asset for no cash. If an asset is disposed of when it is fully depreciated and has no residual value, then the original cost and accumulated depreciation of the long-lived asset are simply written off the accounting books. There is no need to bring the depreciation up to date because the asset is already fully depreciated. In addition, no gain or loss is recognized because no cash was received or paid. A loss is recognized if a company retires a long-lived asset before it is fully depreciated and no cash is received for residual or salvage value. If a long-lived asset is still being used, its cost and accumulated depreciation should remain in the ledger even if the asset is fully depreciated until the company discard the asset. The company may continue to report it on balance sheet even though no additional depreciation expense is recorded.

Accounting for the sale of a long-lived asset is essentially the same as accounting for its discarding except that cash is received in the exchange. In a disposal by sale for cash, the company compares the book value of the asset with the cash received from the sale. If the cash received from the sale exceed the book value of the long-lived asset, a gain on disposal occurs. If the cash received from the sale is less than the book value of the long-lived asset sold, a loss on disposal occurs.

If exchanges have commercial substance (which is when there is a change in cash flow resulting from the transaction), the parties should recognize a gain or loss on the exchange. The old asset will be removed from the accounting books, and the new asset will be recorded at its market value. Most of the exchanges have commercial substance (even when similar assets are exchanged).

As can also be understood from the information given, all the options are the forms of the disposal of property, plant and equipment assets, so the correct answer is E.