
Indicate the method for valuing each of the following assets.

Answer to Problem 1E
The method for valuing each of the following assets is given below:
Asset | Method of valuation |
Buildings | HC/AC |
Available-for-Sale Securities | FMV |
Office Equipment | HC/AC |
Inventory | LCM |
Supplies | HC/AC |
Land | HC/AC |
Trading Securities | FMV |
Intangible Assets | HC/AC |
Held-to-Maturity Securities | HC/AC |
Table (1)
Note: FMV represents fair market value, LCM represents lower of cost or market and HC/AC represents historical cost or amortized cost
Explanation of Solution
Historical Cost:
The historical cost is a measure of value which states that, each and every item should be recorded at its original cost (purchased value), on the
Lower of cost or market:
Lower of cost or market is an accounting method for valuing inventory. In this type of method the inventory is recorded at the historical cost or the market value. Historical cost represents the cost at which the time of inventory is purchased. If the price of the inventory falls below the net realizable value, the Company uses the lower of cost or market method to record the loss incurred.
Fair market value:
Fair market value is the current market value of securities and it is the negotiable price agreed between the seller and the buyer that is, the price at which investor (buyer) has to pay to buy the security in an active market. Fair value is generally decided by the market for most of the investments or assets.
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Chapter E Solutions
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