Becky’s Courier Service is a one-person, one-bicycle operation. Becky’s only capital equipment is a highly specialized, custom-designed mountain bike that can be used throughout the urban jungle.

Required

a. Assume that Becky’s mountain bike broke, what accounting recognition should be given to this tragedy?

b. How would your answer change if the bike had been stolen? Why?

c. Assume that Becky’s mountain bike was destroyed in a fire while chained in a bike rack at a client’s site. The client’s insurance company provided Becky with a check for the replacement cost of the bicycle, which was twice its original price. What accounting recognition should be given to this event?