Question

Crossroads Co. chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither market is the principal market for the financial asset. In the first market, sales proceeds are $76, which is net of transaction costs of $6. In the second market, sales proceeds are $80, which is net of transaction costs of $1. What amount should Crossroads report as the fair value of the asset?a. $76b. $80c. $81d. $82

Answer 1

Answer: the correct answer is c.$81

Step-by-step explanation:

When there are multiple markets for an asset, the fair value of an asset is determined based on prices in the principal or most advantageous market. The second market is more advantageous because it has the higher selling price ($80 is greater than $76). In addition, fair value includes transaction cost; therefore, the valuation of the asset would be $81 = $80 + $1.