An Accountant Is Not Sure on How to Recognise an Asset

question 45

Multiple Choice

An accountant is not sure on how to recognise an asset that is purchased in excess of fair value.Which of the following action will you recommend?

• A) Recognise the asset at fair value and the excess as Goodwill.
• B) Recognise the asset at fair value and the excess as a loss on purchase.
• C) Recognise the asset at fair value and the excess as receivable from supplier.
• D) Recognise the asset at cost.
• E) None of the given answers.

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Definitions:

Acquire

To obtain ownership of something, such as a company purchasing another company or an individual acquiring an asset.

Self-Interest

The pursuit of personal gain or advantage, which is a fundamental economic assumption about human behavior.

Welfare

Welfare denotes governmental support aimed at ensuring the basic physical and material well-being of people, particularly those in need.

Complete Knowledge

Refers to a hypothetical situation where all participants in a market have full and perfect information about products, prices, and other market conditions.