Exam 2: Asset and Liability Valuation and Income Recognition

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. Discuss what types of transactions get this type of treatment and the logic behind this accounting.

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Question 1

Correct Answer:

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The application of GAAP requires firms to write down assets whose fair values decrease below their book values. For example, GAAP requires that firms recognize a loss on equipment in which its fair value has decreased below its book value due to obsolescence or other permanent valuation effect.
GAAP does not allow firms to revalue upward the values of assets whose fair values have increased. Firms must await the validation of the value increase through a market transaction to justify this type of gain.

The net amount a firm would receive if it sold an asset or the net amount it would pay to settle a liability is referred to as:

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Question 2

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Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011, would there still be a deferred tax liability?

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Question 3

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The depreciation amounts would be exactly the same, so there would be no deferred tax liability. A deferred tax liability only occurs when the accelerated depreciation method exceeds the straight line method of calculating depreciation expense.

Current replacement cost represents:

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Question 4

At origination which of the following temporary differences would create a deferred tax asset?

(Multiple Choice)

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Question 5

Refer to Balance Sheet Equation. The payment of a note payable by a firm reduces cash and ______________________________.

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Question 6

Shareholders' equity consists of what three components:

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Question 7

What valuation methods reflect historical cost? Discuss the advantages and disadvantages of valuing assets and liabilities using historical valuations.

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Question 8

Which of the following valuation methods reflects current values?

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Question 9

A change in the _ or _ will not change a preset series of cash flows, however it will change the present value of those cash flows.

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Question 10

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

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Question 11

Net income equals revenues plus minus expenses and .

(Short Answer)

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Question 12

Revenues and expenses that firms include in both net income to shareholders and in taxable income, but in different periods are referred to as _____________________________________________.

(Short Answer)

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Question 13

What valuation methods reflect current values? Discuss the advantage(s) and disadvantage(s) of valuing assets and liabilities using current values.

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Question 14

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?

(Multiple Choice)

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Question 15

Firms use acquisition cost valuations and adjusted acquisition cost valuations for which of the following types of assets?

(Multiple Choice)

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Question 16

Future taxable income is characteristic of all of the following situations except :

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Question 17

The traditional accounting model delays the recognition of value changes of assets and liabilities until what event occurs?

(Multiple Choice)

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Question 18

What level are inputs for estimating fair values are those inputs include quoted prices for similar assets or liabilities in active or inactive markets, other observable information such as yield curves and price indexes, and other observable data such as market-based correlation estimates?

(Multiple Choice)

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Question 19

Future tax deductions:

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Question 20

Showing 1 - 20 of 70

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. Discuss what types of transactions get this type of treatment and the logic behind this accounting.

The net amount a firm would receive if it sold an asset or the net amount it would pay to settle a liability is referred to as:

Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011, would there still be a deferred tax liability?

Current replacement cost represents:

At origination which of the following temporary differences would create a deferred tax asset?

Refer to Balance Sheet Equation. The payment of a note payable by a firm reduces cash and ______________________________.

Shareholders' equity consists of what three components:

What valuation methods reflect historical cost? Discuss the advantages and disadvantages of valuing assets and liabilities using historical valuations.

Which of the following valuation methods reflects current values?

A change in the _ or _ will not change a preset series of cash flows, however it will change the present value of those cash flows.

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

Net income equals revenues plus minus expenses and .

Revenues and expenses that firms include in both net income to shareholders and in taxable income, but in different periods are referred to as _____________________________________________.

What valuation methods reflect current values? Discuss the advantage(s) and disadvantage(s) of valuing assets and liabilities using current values.

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?

Firms use acquisition cost valuations and adjusted acquisition cost valuations for which of the following types of assets?

Future taxable income is characteristic of all of the following situations except :

The traditional accounting model delays the recognition of value changes of assets and liabilities until what event occurs?

What level are inputs for estimating fair values are those inputs include quoted prices for similar assets or liabilities in active or inactive markets, other observable information such as yield curves and price indexes, and other observable data such as market-based correlation estimates?

Future tax deductions:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

Exam 2: Asset and Liability Valuation and Income Recognition

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. Discuss what types of transactions get this type of treatment and the logic behind this accounting.

The net amount a firm would receive if it sold an asset or the net amount it would pay to settle a liability is referred to as:

Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011, would there still be a deferred tax liability?

Current replacement cost represents:

At origination which of the following temporary differences would create a deferred tax asset?

Refer to Balance Sheet Equation. The payment of a note payable by a firm reduces cash and ______________________________.

Shareholders' equity consists of what three components:

What valuation methods reflect historical cost? Discuss the advantages and disadvantages of valuing assets and liabilities using historical valuations.

Which of the following valuation methods reflects current values?

A change in the _________________________ or _________________________ will not change a preset series of cash flows, however it will change the present value of those cash flows.

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

Net income equals revenues plus ____________________ minus expenses and ____________________.

Revenues and expenses that firms include in both net income to shareholders and in taxable income, but in different periods are referred to as _____________________________________________.

What valuation methods reflect current values? Discuss the advantage(s) and disadvantage(s) of valuing assets and liabilities using current values.

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?

Firms use acquisition cost valuations and adjusted acquisition cost valuations for which of the following types of assets?

Future taxable income is characteristic of all of the following situations except :

The traditional accounting model delays the recognition of value changes of assets and liabilities until what event occurs?

What level are inputs for estimating fair values are those inputs include quoted prices for similar assets or liabilities in active or inactive markets, other observable information such as yield curves and price indexes, and other observable data such as market-based correlation estimates?

Future tax deductions:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

A change in the _ or _ will not change a preset series of cash flows, however it will change the present value of those cash flows.

Net income equals revenues plus minus expenses and .