Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 1C
To determine
Draft a memo that explains the reason for which the company is required to state the fair value of an asset, define the meaning of fair value and explain the manner in which it is measured.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Answer the following questions in depth ....
Why do accountants have to classify items as capital or revenue expenditures? Why do you treat exchanges of similar and dissimilar assets differently? Aren't they all exchanges?
Is it true that the higher the depreciation, the lower the net income? If that is the case, why would we not want the lowest depreciation method so we can show the highest net income?
Why do we have various methods of depreciation? Isn't that encouraging misleading results?
Which of the following statements is/are correct?
1. Depreciation represents the loss in market value of an asset.
II. The statement of financial position is likely to do a better job at capturing the
assets/resources of a retailer (such as a supermarket) than a professional services firm
(such as a law firm or professional accountancy firm).
III. All tangible non-current assets go through the process of depreciation.
IV. The following will have a negative impact on profitability in a given year: (a) increasing the
allowance for trade receivables on the balance sheet, (b) reducing the useful life of
depreciable non-current assets, (c) writing down closing inventory.
a.
Another combination of statements not shown among the other answers.
b. All of the statements are correct.
c. (II) and (IV)
d.
(I) and (III)
e. (I), (II) and (III)
f. (I), (III) and (IV)
After reading the case, you will choose one side to assist (you’ve been hired by Dave James OR you’ve been hired by the three Branson brothers).
Prepare a Business Valuation Report.
Explain the reasoning for applying any premiums or discounts that other business valuators might use.
Discuss limitations, if any, in your report.
Given that Branson Trucking possesses a large amount of tangible assets, an asset-based approach can provide a baseline valuation. This method is able to compute the company's net asset value by adding the fair market value of its assets and subtracting liabilities.
Keeping this information in mind, the highlighted information provided in the scenario is as follows:
Total Assets (Fair Market Value): $10,500,000
Total Liabilities: $5,100,000
Net Asset Value: $5,400,000
Net Income (2020): $1,172,000
Retained Earnings: $2,065,000
Application of Premiums and Discounts
Control Premium: A control premium is applied to reflect the value of having a controlling…
Chapter 4 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 4 - What is the accounting equation? The balance sheet...Ch. 4 - Prob. 2GICh. 4 - How does the balance sheet at the end of an...Ch. 4 - What does recognition mean in accounting?Ch. 4 - Prob. 5GICh. 4 - Prob. 6GICh. 4 - What is equity? How is equity determined?Ch. 4 - What is a mixed attribute measurement model? Why...Ch. 4 - Identify at least five alternatives for measuring...Ch. 4 - Identify at least three alternatives for measuring...
Ch. 4 - Prob. 11GICh. 4 - Prob. 12GICh. 4 - Prob. 13GICh. 4 - Prob. 14GICh. 4 - Prob. 15GICh. 4 - Prob. 16GICh. 4 - Define (a) common stock, (b) additional paid-in...Ch. 4 - Prob. 18GICh. 4 - Prob. 19GICh. 4 - What are investments by owners? Distributions to...Ch. 4 - What accounting policies are disclosed in the...Ch. 4 - Give several examples of financial instruments and...Ch. 4 - Prob. 23GICh. 4 - Prob. 24GICh. 4 - Prob. 25GICh. 4 - Prob. 26GICh. 4 - Prob. 27GICh. 4 - Prob. 28GICh. 4 - Prob. 29GICh. 4 - Prob. 30GICh. 4 - Prob. 31GICh. 4 - Prob. 32GICh. 4 - Prob. 33GICh. 4 - Prob. 34GICh. 4 - A donated fixed asset (from a governmental unit)...Ch. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - On October 2, 2020, a company borrowed cash and...Ch. 4 - Prob. 5MCCh. 4 - Rent revenue collected 1 month in advance should...Ch. 4 - Prob. 7MCCh. 4 - Prob. 8MCCh. 4 - Which of the following should be disclosed in the...Ch. 4 - Prob. 10MCCh. 4 - Prob. 1RECh. 4 - Dorothy Corporation had the following accounts in...Ch. 4 - Dorothy Corporation had the following accounts in...Ch. 4 - Based on the information in RE4-2 and RE4-3,...Ch. 4 - Prob. 5RECh. 4 - Oz Corporation has the following assets at...Ch. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Scarecrow Inc. issues 50,000 shares of 2 par value...Ch. 4 - Tinman Corporation reports the following balances...Ch. 4 - Prob. 1ECh. 4 - Plant and Equipment Your analysis of Moen...Ch. 4 - GRAF CORPORATION Shareholders Equity Section of...Ch. 4 - Prob. 4ECh. 4 - Classifications on Balance Sheet The balance sheet...Ch. 4 - Balance Sheet Baggett Companys balance sheet...Ch. 4 - Prob. 7ECh. 4 - Balance Sheet Calculations Dawson Companys balance...Ch. 4 - Prob. 9ECh. 4 - Correction of Balance Sheet On December 31, 2019,...Ch. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Classifications on Balance Sheet The current...Ch. 4 - Balance Sheet without Amounts The following is an...Ch. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Balance Sheet Calculations Cornerstone Development...Ch. 4 - Prob. 6PCh. 4 - Complex Balance Sheet Presented below is the...Ch. 4 - Analyzing Starbuckss Balance Sheet Disclosures...Ch. 4 - Prob. 9PCh. 4 - Balance Sheet The following is a list (in random...Ch. 4 - Balance Sheet The following is an alphabetical...Ch. 4 - Balance Sheet from Adjusted Trial Balance The...Ch. 4 - Balance Sheet and Notes Listed here in random...Ch. 4 - Comprehensive: Balance Sheet, Schedules, and Notes...Ch. 4 - Use following formation for P4-15 and P4-16:...Ch. 4 - Ratios Analyses: McCormick Refer to the...Ch. 4 - Prob. 17PCh. 4 - Use the following information for P417 and P418:...Ch. 4 - Prob. 1CCh. 4 - It is the end of 2019 and you are an accountant...Ch. 4 - Prob. 3CCh. 4 - Valuation of Assets and Stock A friend has come to...Ch. 4 - It is February 16, 2020, and you are auditing...Ch. 4 - You are the accountant for Speedy Company and are...Ch. 4 - Prob. 7CCh. 4 - Prob. 8CCh. 4 - Situation You are the assistant accountant for...
Knowledge Booster
Similar questions
- 1.How can exit value accounting be used to assess the financial risk of a balance sheet. 2.Evaluate the argument that a mixed or piecemeal approach to standard setting is required in order to ‘better’ measure profit and financial position. 3.Explain how both exit price and current entry price accounting systems can be used to make decisions about retaining or selling assets.arrow_forwardWhich of the following statements are true? Select one or more: a. MACRS must be used for book purposes if it is used for tax purposes. b. Managers often prefer the straight-line method because it helps to smooth earnings. c. Units of production method is not appropriate for natural resources. d. Double-declining balance recognizes more depreciation expense early in an asset's life. PreviousSave AnswersNextarrow_forwardi need the answer quicklyarrow_forward
- Jordan’s response about the ratio impact of Alpha’s decision to capitalize interest costs ismost likely correct with respect to the:A. interest coverage ratio.B. fixed asset turnover ratio.C. interest coverage and fixed asset turnover ratios.arrow_forwardFair Value Accounting and Valuation in 3 Steps: Asset or Liability Identification: The first step involves identifying the specific assets or liabilities that will be measured at fair value. This could include financial instruments, tangible assets, intangible assets, or other items on the balance sheet. Market-Based Valuation Techniques: Fair value is determined using market-based valuation techniques. This may involve assessing current market prices, recent transactions, or employing valuation models such as discounted cash flows, comparable sales, or option pricing models. Consistent Application and Disclosure: Fair value accounting requires consistent application of valuation methods across reporting periods. Additionally, transparency and disclosure are crucial, with companies providing detailed information about the inputs, assumptions, and methods used in fair value measurements. Objective Type Question: In fair value accounting, what is the primary purpose of…arrow_forwardYou are an investor trying to determine the total value of a firm's assets (recall that one way to summarize the value of a company is the total value of its assets). Which of the following best describes the true "market value of the firm's assets that you would be looking for as a potential investor seeking to find the value of the firm? A. The assets' total market value is the cost associated with acquiring those assets. B. The assets' total market value can be found by adding up all of the individual asset values on the firm's balance sheet. C. The market value of the firm's assets is the total value the firm could get if it sold all of its tangible assets (machines, buildings, etc.) to the highest bidder. D. The assets' total market value is the present value of all of the cash flows that they can generate within the firm. Both C and D are correct.arrow_forward
- 4. The cost of an asset and its fair value are Select answer from the options below: a) irrelevant when the asset is used by the business in its operations. b)never the same. c) the same on the date of acquisition. d) the same when the asset is sold. 6. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates Select answer from the options below: a. no errors can be discovered. b. no errors have been made. c. the mathematical equality of the accounting equation. d . that all accounts reflect correct balances. 7. The final step in the recording process is to Select answer from the options below: a. enter the transaction in a journal. b. prepare a trial balance. c. transfer journal information to ledger accounts. d. analyze each transaction. 8. The time period assumption states that Select answer from the options below: a. the economic life of a business can be divided into artificial time periods. b. estimates should not be made if a…arrow_forwardWhich of the following explains why relative valuation is preferred over intrinsic valuation? a. It requires the collection of data regarding similar firms, thus this method is time-consuming.b.It reflects historical costs that are grounded with facts and not based on assumptions c. Individuals with minimal accounting and finance knowledge can apply this method. d.It uses assumptions that are more cash-flow based.arrow_forwardWhich of the following is false regarding book and market values? Select one: O a. Financial managers should rely on book values, and not market values, when analyzing the firm's tax liability. O b. Book value is an accounting summary of value and is inferior to market value as a source of current information regarding the true value of the firm. c. Market value always exceeds book value. O d. The market value of fixed assets is often difficult to determine.arrow_forward
- Explain why the value of an asset is its current market value and not what you paid for it? Why is it so important to have my assets properly valued (what need might arise)? Explain why every individual needs some liquid assets. What is the problem if the amount is too low? What is the problem if the amount is too high?arrow_forwardplease provide correct answer with no plagiarism thnkuarrow_forwardHistorical cost is based on actual, not merely possible, transactions. It is the acquisition price of the assets. The managers only have to record all the assets and liabilities at their acquisition price. This results in; a. Less manipulations in financial statements b. surviving test of time c. making relevant economic decisions d. Nonearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning