Skip to main content

Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTION

Whether any problem occurs when economic events and physical assets are translated into monetary units and to give an example in support of the answer. Introduction: Accounting can be defined as a process wherein financial transactions are recorded. This process summarizes, evaluates and provides useful insight about these transactions to tax collection entities, regulators and agencies. Accounting helps in summarizing the cash flows, financial position and operation of the company over an accounting period. The problems arise while translating physical assets and economic events into monetary units on account of purchase price accounting or fair value accounting of assets and liabilities in the balance sheet . At times there is a difference in the purchase price of the asset/liability as compared to its fair value which poses a challenge in front of the company in terms of whether to record such asset/liability at its purchase price or fair value. An example to this problem could be as follows: XYZ Inc. purchased a machinery for $100,000 on January 1, 2020 for its production process. As on the date of purchase, the fair value of the machinery was $80,000. Now XYZ faces a problem in reporting of machinery as it will impact the depreciation expense to be claimed each year which in turn impact the profitability of the company. As per IFRS, the company should record the purchased asset at fair value as that is the correct metric to use and reflect the arm’s length price as on date. It can be concluded that the problem will arises when economic events and physical assets are translated into monetary units.

Whether any problem occurs when economic events and physical assets are translated into monetary units and to give an example in support of the answer. Introduction: Accounting can be defined as a process wherein financial transactions are recorded. This process summarizes, evaluates and provides useful insight about these transactions to tax collection entities, regulators and agencies. Accounting helps in summarizing the cash flows, financial position and operation of the company over an accounting period. The problems arise while translating physical assets and economic events into monetary units on account of purchase price accounting or fair value accounting of assets and liabilities in the balance sheet . At times there is a difference in the purchase price of the asset/liability as compared to its fair value which poses a challenge in front of the company in terms of whether to record such asset/liability at its purchase price or fair value. An example to this problem could be as follows: XYZ Inc. purchased a machinery for $100,000 on January 1, 2020 for its production process. As on the date of purchase, the fair value of the machinery was $80,000. Now XYZ faces a problem in reporting of machinery as it will impact the depreciation expense to be claimed each year which in turn impact the profitability of the company. As per IFRS, the company should record the purchased asset at fair value as that is the correct metric to use and reflect the arm’s length price as on date. It can be concluded that the problem will arises when economic events and physical assets are translated into monetary units.

Solution Summary: The author explains that accounting helps in summarizing the cash flows, financial position, and operation of the company over an accounting period.

EBK HEALTHCARE FINANCE: AN INTRODUCTION

EBK HEALTHCARE FINANCE: AN INTRODUCTION

6th Edition

ISBN: 9781567937428

Author: Gapenski

Publisher: YUZU

See similar textbooks

Concept explainers

Balance of Payments

BOP is categorized into the following three components:

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

Blurred answer

Chapter 3, Problem 1.1STQ

Chapter 3, Problem 2.1STQ

Students have asked these similar questions

Outline how you would incorporate the following into the CCAPM:a. Liquidity.b. Nontraded assets. (Do you have to worry about labor income?)

What is the difference between experience versus assets with an example?

why we need to know the difference between fixed and current assets?

Chapter 3 Solutions

EBK HEALTHCARE FINANCE: AN INTRODUCTION

Ch. 3 - Prob. 1.1STQ Ch. 3 - Prob. 1.2STQ Ch. 3 - Prob. 2.1STQ Ch. 3 - Prob. 2.2STQ Ch. 3 - Prob. 2.3STQ Ch. 3 - Prob. 3.1STQ Ch. 3 - Prob. 3.2STQ Ch. 3 - Prob. 3.3STQ Ch. 3 - Prob. 3.4STQ Ch. 3 - Prob. 3.5STQ

Ch. 3 - Prob. 4.1STQ Ch. 3 - Prob. 4.2STQ Ch. 3 - Prob. 4.3STQ Ch. 3 - Prob. 5.1STQ Ch. 3 - Prob. 5.2STQ Ch. 3 - Prob. 5.3STQ Ch. 3 - Prob. 6.1STQ Ch. 3 - Prob. 6.2STQ Ch. 3 - Prob. 7.1STQ Ch. 3 - Prob. 7.2STQ Ch. 3 - Prob. 7.3STQ Ch. 3 - Prob. 8.1STQ Ch. 3 - Prob. 8.2STQ Ch. 3 - Prob. 8.3STQ Ch. 3 - Prob. 8.4STQ Ch. 3 - Prob. 9.1STQ Ch. 3 - Prob. 9.2STQ Ch. 3 - Prob. 9.3STQ Ch. 3 - Prob. 10.1STQ Ch. 3 - Prob. 10.2STQ Ch. 3 - Prob. 11.1STQ Ch. 3 - Prob. 11.2STQ Ch. 3 - Prob. 12.1STQ Ch. 3 - Prob. 12.2STQ Ch. 3 - Prob. 12.3STQ Ch. 3 - Prob. 13.1STQ Ch. 3 - Prob. 13.2STQ Ch. 3 - Prob. 13.3STQ Ch. 3 - Prob. 13.4STQ Ch. 3 - Prob. 14.1STQ Ch. 3 - Prob. 14.2STQ Ch. 3 - Prob. 14.3STQ Ch. 3 - Prob. 15.1STQ Ch. 3 - Prob. 15.2STQ Ch. 3 - Prob. 16.1STQ Ch. 3 - Prob. 16.2STQ Ch. 3 - Prob. 3.1Q Ch. 3 - Prob. 3.2Q Ch. 3 - Prob. 3.3Q Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Prob. 3.6Q Ch. 3 - Prob. 3.7Q Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Prob. 3.1P Ch. 3 - Prob. 3.2P Ch. 3 - Prob. 3.3P Ch. 3 - Prob. 3.4P Ch. 3 - Prob. 3.5P Ch. 3 - Prob. 3.6P Ch. 3 - Prob. 3.7P Ch. 3 - Prob. 3.8P Ch. 3 - Prob. 3.9P

Knowledge Booster

Background pattern image

Finance

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Recommended textbooks for you

Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning

Text book image

Principles of Accounting Volume 1

Accounting

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax College

Text book image

Intermediate Financial Management (MindTap Course...

Finance

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Cengage Learning

SEE MORE TEXTBOOKS