Where There Is a Difference Between Fair Value at Initial

question 1

Multiple Choice

Where there is a difference between fair value at initial recognition and cost,assuming no other standard prohibits it,the entity should?

• A)Immediately adjust the value and recognise profit or loss.
• B)Ignore the difference as there should be no day one gain or loss.
• C)Amortise the difference over the useful life of the item.
• D)Pay more or less for the item to make the figures equal.

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Definitions:

Efficiency Wages

A higher wage paid by employers to increase worker productivity and loyalty, reducing turnover and shirking.

Substitution Effect

The change in quantity demanded of a good due to a change in its price, causing consumers to substitute it with other similar goods.

Labor Supplied

Refers to the total hours that workers are willing and able to work at a given wage rate, in a given time period.

Income Effect

Describes how a change in an individual's income affects their purchasing decisions.