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Vikentia [17]
3 years ago
12

Financial statements are inexorably moving to a model where all assets and liabilities will be measured on the basis of fair val

ue rather than historical cost.
Required:
a. Discuss the conceptual differences between historical cost and fair value.
b. Discuss the merits and demerits of the two alternative measurement models.
c. What types of assets (or liabilities) more readily lend themselves to fair value measurements? Can we visualize a scenario where all assets are measured using fair value?
d. What are the likely effects of adopting the fair value model on reported income?
Business
1 answer:
amm18123 years ago
6 0

Answer:

Part a

historical cost = this is when we carry assets and liabilities at cost less accumulated depreciation or amortization.

fair value = this is when we carry assets and liabilities at amount that they could be exchanged for at arms length between market participants

Part b

<u>Historical Cost </u>

Merits : Value are easy to obtain since they are generated internally

Demerits : Is not very accurate.

<u>Fair Value</u>

Merits : Accurate method as it reflects market situation

Demerit : Costly as data and information is obtained externally

Part c

Assets : Investment Property and Financial assets measured through Profit and Loss

Liabilities : Bonds

Part d

Income is shown more accurately and eliminates biases form estimates.

Explanation:

Historical Method carries assets and liabilities at cost less accumulated depreciation or amortization while Fair Value Model carries assets and liabilities at amount that they could be exchanged for at arms length between market participants

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The Alston Inn is managed by Inns, Inc. The management contract requires 6 percent of total revenue to be transferred to the rep
Scrat [10]

Answer:

1.) Inn's annual total revenue = $7,300,000

2.) Inn's annual net operating income = $1,095,000

3.) Inn's debt service coverage ratio for the year = 9.13

Explanation:

The room revenue is first calculated as follows:

Room revenue = Number of guestrooms * ADR * Percentage of occupancy * 365 days = 200 * $100 * 70% * 365 = $5,110,000

We can now proceed as follows:

1.) Determine the Inn's annual total revenue.

Annual total revenue = Room revenue / Paid occupancy percentage = $5,110,000 / 70% = $7,300,000

2.) Determine the Inn's annual net operating income

Annual net operating income = Total revenue * 15% = $7,300,000 * 15% = $1,095,000

3.) Determine the Inn's debt service coverage ratio for the year.

Debt service coverage ratio = Net operating income / Annual debt service = $1,095,000 / ($10,000 * 12) = 9.13

5 0
3 years ago
What is the price of a coupon bond that has annual coupon payments of $75, a face value of $1000, interest rate of 5%, and a mat
Citrus2011 [14]

$1,046.49.

The price of a coupon Bond that has periodic coupon payments of $ 75, a face value of  $ 1000, an interest rate of 5%, and a maturity of two times is $1,046.49.

Coupon Bond: A bond having tickets attached that reflect semiannual interest payments is known as a coupon bond, deliverer bond, or bond pasteboard. With coupon bonds, the issuer doesn't keep any records of the buyer, and no instrument has the buyer's name moreover.

The price of a coupon bond that has periodic coupon payments of $75, a face value of $1000, an interest rate of 5%, and a maturity of two times is $1,046.49.

To learn more about Coupon Bond, visit the following link:

brainly.com/question/26376004

#SPJ4

6 0
1 year ago
1. Identify and describe two incremental cash flows from a proposed project such as expanding a product line or launching a new
Mazyrski [523]

Answer:

Explanation:

1. Incremental cash flow is the potential increase or decrease in cash flow from an investment this could be positive or negative.

In this case in expanding a product line or launching a new project incremental cash flow could be.

a. Positive: this is the increase in cash flow due to the product launch and expansion.

b. Negative: this is the decrease in cash flow due to the product launch and expansion

2. a. Payback:

profit gotten from an initial investment equal to what was initially invested

b. Net Present Value(NPV)

This is the difference between present value of income and present value of expenditure over a period of time.

c. Internal Rate of Return(IRR)

Measure the rates of returns for an investment excluding external factors such as risk free rates, inflation e.t.c

d. Profitability Index Method (PIM)

this is the  lowest acceptable measures of the rates of returns for an investment excluding external factors such as risk free rates,inflation e.t.c

6 0
3 years ago
Study groups: do they work or not?
Oduvanchick [21]

Answer:

When working on a group project, studying and working within a group will be a necessity, so you need to make it work for you! Studying in groups has its advantages and disadvantages, but the trick is to know when to resort to solo studying and when to go for group studying. Studying with a partner is a valuable way to learn as students help one another at overcoming weak points.

Advantages of Studying in Groups

1. Brainstorming

Studying in groups allows students to share their different thoughts with one another. This notion usually leads to a better learning process, since brainstorming generates new ideas and thus, students learn the same thing but with different perspectives. Open discussion enhances thinking skills and will give you access to others information and as a result, broadens your mind.

2. Clarification Discussions

Students are different and they perceive the same information differently. You can always ask your study mate to clarify a vague point for you and vice versa. Also, this action increases retention and reinforces the ideas, because the more the information is repeated the stronger the memory will be.

3. Motivation Booster

Group studying is the best procrastination solution as it breaks the monotonous learning process and it makes you attentive to what the others are saying. Mock tests and trial quizzes assist those struggling with course materials and those extracting tests and quizzes from them as well.

Disadvantages of Studying in Groups

1. Distraction

The benefits of group studies are a lot but there are also some cons to group studying. You may find it tiresome to stay focused when studying in a group. Sometimes the conversation shifts from studying to trendy events maximizing distraction. Studying alone might be helpful if you need undivided attention to the materials at hand.

2. Lack of Efficiency

Group studying hampers creativity and efficiency and when there are exams on the horizon, efficiency should be the priority. Studying alone will give you time and space to do your personalized studying. Also, when alone, you can focus freely on a certain part because you know you need to and skip other parts that you have already mastered. This allows you to manage your time wisely and prioritise your tasks.

3. Impersonalized Learning

Our brains conceive information differently, and in order to digest information correctly, you have to do it your own way, not another’s. When studying in a group, you might be studying at someone else’s pace, whether it is too fast or too slow, it will not help you with learning. Also, you might lose track of your own questions and the difficulties you might be facing with the subject at hand because students mostly do not want to diverge from the group. Creating personalized study plans for suture references will also save much time if the student loves to follow a plan and a schedule while studying.

Preferring one way over another does not necessarily mean that it is better; however, it simply means that people choose what suits their characters best. For example, a social person might find it difficult to study alone and find it more appealing to talk to people to learn and on the other hand, another social person will choose to study alone because he gets distracted easily with people and he can focus better when alone. In a nutshell, there is no way advantageous than the other; everyone has his own studying methods and each has its advantages and disadvantages.

6 0
2 years ago
Our society is increasingly becoming more diverse. Discuss how this affects you as an individual, an organization, and society a
Mekhanik [1.2K]

Answer

Hello,

Well, a diverse society is stable and alive with positive dynamics, easy to adapt to changes and always geared towards a positive evolutionary.

As an individual, a diverse society offers greater opportunity for personal and professional growth.

In the society, diverse cultural views can inspire creativity and innovation. A diverse society has a pool of diverse skills base which allows an organization to produce broader and more adaptable range of goods and services.

A challenge in this is that integration across multicultural groups can be difficult due to negative cultural stereotypes. Some countries require navigating visa and application of employment laws that could be challenging requirements.

Diversity quotas in colleges can be outlawed but still allow colleges to consider race in admitting students.

Wish you luck!

5 0
3 years ago
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