Answered: When an asset or liability is initially…

When an asset or liability is initially recorded, what determines its amount? The Replacement cost The initial measurement The future value of future cash flows The present value of future cash flows

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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When an asset or liability is initially recorded, what determines its amount?

The Replacement cost

The initial measurement

The future value of future cash flows

The present value of future cash flows

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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