Abstract This paper is written for the accounting theory course as a course project. This paper discusses the differences between the historical cost accounting approach and the fair value accounting approach. The discussion will focus on the debate on using which accounting approach. We begin by stating the definitions of both concepts and discussing them thoroughly‚ then we state the main advantages of the two approaches followed by comparison between them. The last section of this paper discusses
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Credit balances in Accounts Receivable shall be classified as a. Current Liabilities b. Part of Accounts Payable c. Long-term Liabilities d. Reduction from accounts 4. Which of the following is not an acceptable lasts for valuation of inventory? a. Historical Cost b. Current replacement cost c. Prime cost d. Current selling price less cost of disposal 5. Capetown Company began operation on Jan. 1‚ 2011 Capetown has found that its estimated bad debt expense has been consistently
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cannot pay a note due that day. It is a $500‚000 note with $50‚000 accrued interest payable to Edsen‚ Inc. Edsen agrees to forgive the accrued interest‚ extend the maturity date to December 31‚ 2008‚ and reduce the interest rate to 4%. The present value of the restructured cash flows is $428‚000. Instructions Prepare entries for the following: (a) The restructure on Poore’s books. (5 points) (b) The payment of interest on December 31‚ 2007. (5 points) (c) The restructure on Edsen’s books
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What is Fair Value Accounting? An alternative approach to measurement that seeks to capture changes in asset and liability values over time. The International Accounting Standards Board (IASB) defines fair value as "... an amount at which an asset could be exchanged between knowledgeable and willing parties in an arms length transaction". Under the fair value measurement approach‚ assets and liabilities are re-measured periodically to reflect changes in their value‚ with the resulting change impacting
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2010—Pages 93–118 Did Fair-Value Accounting Contribute to the Financial Crisis? Christian Laux and Christian Leuz I n its pure form‚ fair-value accounting involves reporting assets and liabilities on the balance sheet at fair value and recognizing changes in fair value as gains and losses in the income statement. When market prices are used to determine fair value‚ fair-value accounting is also called mark-to-market accounting. Some critics argue that fair-value accounting exacerbated the
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Chapter 16 codification assignment 1. Identify what authoritative literature addresses accounting for stock compensation plans. What are the objectives for the accounting for share based compensation? 718-10-10-1 The objective of accounting for transactions under share-based payment arrangements with employees is to recognize in the financial statements the employee services received in exchange for equity instruments issued or liabilities incurred and the related cost to the entity as
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Schwartz’ s value Inventory Shalom Schwartz (1992‚ 1994) used his “Schwartz Value Inventory’ (SVI) with a wide survey of over 60‚000 people to identify common values that acted as “guiding principles for one’s life” He identified ten “value types” that gather multiple values into a single category. Power This takes value from social statues and prestige. The ability to control others is important and power will be actively sought through dominance of others and control over resources.
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should record sales revenue in January 2010 of what? Present value of annuity due PVad = [ $80‚000 x f( n=7‚ i=10%)] x (1+.10) PVad = $80‚000 x 4.868 x 1.10 = $428‚384 2.) On January 1‚ 2010‚ Haley co. issued ten-year bonds with a face amount of $2‚000‚000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. What was the total price of the bonds? Requires both Present value of a single sum and ordinary annuity PVss = $2‚000‚000 x f(
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Under fair value accounting‚ earnings of a firm constitutes three broad components namely asset income‚ realized gains and unrealized gains. What impact does this have on a firm’s earnings quality given that the main shift from current accounting standards is the inclusion of unrealized gains into earnings computation? Often‚ it holds true that what matters is not how much a firm makes‚ but how it makes its money . Investors value earnings that are sustainable‚ inherent to a firm’s business and
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Western Michigan university | Is It Fair to Blame Fair Value Accounting for the Financial Crisis? | By Robert C. Pozen | | Luma Raha | 10/12/2011 | The article from the Harvard Business Review‚ "Is it Fair to Blame Fair Value Accounting for the Financial Crisis?" ‚ author Robert Pozen stipulates that the fair value accounting principles did not cause the financial crisis of 2008‚ but certainly aggravated it by common misconceptions about accounting standards. The article defines
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