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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTIO

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 INTRODUCTIO

EBK HEALTHCARE FINANCE: AN INTRODUCTIO

6th Edition

ISBN: 9781567938111

Author: Gapenski

Publisher: VST

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Chapter 3, Problem 1.1STQ

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EBK HEALTHCARE FINANCE: AN INTRODUCTIO

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

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