The General Rule Under Modified Historical-Cost Accounting Is That Holding

question 63

Multiple Choice

The general rule under modified historical-cost accounting is that holding gains on non-current assets should be:

• A) treated as revenue in the period that the fair value of the asset changes.
• B) deferred and amortised over the life of the asset (effectively decreasing depreciation expense).
• C) recognised as part of income and hence, of total comprehensive income
• D) never recognised.

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Definitions:

Accounting Period

A specific time range for which financial statements are prepared, often quarterly or annually, to present the financial status and performance of a company.

Note Payable

A written agreement where one party promises to pay another party a certain amount of money, often including interest, at a future date or on demand.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected in its income statement.

Estimated Liability

A projected financial obligation a company expects to incur due to past transactions or events, but whose amount or timing is not yet certain.