Which of the Following Applies to the Measurement and Recognition

question 42

Multiple Choice

Which of the following applies to the measurement and recognition of an asset?

• A)A pervasive principle in accounting is that an asset is measured at the market value of the consideration exchanged or sacrificed to acquire it and place it in operating condition.
• B)In some cases, an asset may be recorded at an amount greater than its cash equivalent purchase price.
• C)When the consideration given for an asset is non-monetary, the market value of that consideration generally provides the most reliable basis for measuring acquisition cost.
• D)Assets are always measured and reported based on historical cost.

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Definitions:

Conservatism

An accounting principle that requires uncertainties and risks to be accounted for by reporting lower potential profits and higher liabilities.

Replacement Cost

The cost to replace an asset at its current market price, often used in insurance and accounting.

Inventory

The total amount of goods or materials a company has in stock for sale or production.

LIFO Method

Last In, First Out method; an inventory valuation method where the last items added to inventory are assumed to be sold first.