The Use of Replacement Cost of Assets for Purposes of Calculating

question 65

Multiple Choice

The use of replacement cost of assets for purposes of calculating return on investment (ROI) has the advantage of:

• A) Historical accuracy.
• B) Being a relevant measure of the level of investment in a continuing business.
• C) Objectivity.
• D) Consistency with generally accepted accounting principles (GAAP).
• E) Avoiding the need for developing estimates of current cost.

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Definitions:

Statement

A formal record that summarizes financial activities or conditions, such as an income statement, balance sheet, or cash flow statement.

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity.

Disclosures

The act of making new or secret information known, typically in a formal report.

Financial Accounting Standards Board (FASB)

The private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles.