Exam 2: Asset and Liability Valuation and Income Measurement

The amount initially paid to acquire an asset is called ______________________________.

The following problem requires present value information: Biotech sold a patent on a new blood analyzer to Pharma.The sales agreement which was signed on January 1,2009 requires Pharma to pay Biotech $1 million immediately.In addition,Pharma is required to pay $600,000 each December 31 for 20 years starting with December 31,2009.Pharma and Biotech judge that a 10 percent is an appropriate interest rate for this arrangement. a.Compute the present value of the receivable on Biotech's books on January 1,2009 immediately after receiving the $1 million down payment. b.Compute the present value of the receivable on Biotech's books on December 31,2009. c.Compute the present value of the receivable on Biotech's books on December 31,2010.

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

If a portfolio manager had to estimate the fair value of investments in timber,which of the following would he/she most likely identify as the level of inputs to determine this?

Current replacement cost represents

The application of GAAP requires firms to write down assets whose fair values decrease below their book values,but does not allow firms to revalue upward the values of assets whose fair values have increased.This asymmetric treatment rests on the ________________________________________.

Net income equals revenues plus ____________________ minus expenses and ____________________.

The use of acquisition cost as a valuation method is justified on the basis that acquisition cost is:

Jurgen Company's income tax return shows income taxes for 2010 of $75,000 (that is,$75,000 is owed for 2010).For financial reporting,the firm reports deferred tax assets of $67,900 at the beginning of 2010 and $63,600 at the end of 2010.It reports deferred tax liabilities of $53,600 at the beginning of 2010 and $59,400 at the end of 2010. Required: a.Compute the amount of income tax expense for 2010. b.Assume for this part that the firm's deferred tax assets are as stated above for 2010 but that its deferred tax liabilities were $83,500 at the beginning of 2010 and $72,100 at the end of 2010.Compute the amount of income tax expense for 2010. c.Explain contextually why income tax expense is higher than taxes owed in Part a and lower than taxes owed in Part b.

Which of the following valuation methods reflects current values?

Fish Farm Corporation purchases a new tract of land on which it is going to build new growing and holding tanks in order to expand its business.Which of the following costs would not be part of the cost of the land?

If a portfolio manager had to estimate the fair value of illiquid mortgage-backed securities,which of the following would he/she most likely identify as the level of inputs to determine this?

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?

The amount that a company would have to pay today to acquire an asset it now holds is called ________________________________________.

Balance Sheet Equation Refer to Balance Sheet Equation.To recognize the cost of goods sold ORP Corporation will reduce retained earnings and reduce ______________________________. non-cash assets or non cash assets

Which of the following transactions is consistent with recognizing value changes on the balance sheet and income statement when they are realized in a market transaction?

Balance Sheet Equation Refer to Balance Sheet Equation.The payment of dividends by a firm reduces cash and ______________________________. retained earnings

____________________ assets and liabilities represent amounts of cash a firm can expect to receive or pay in the future.

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