The Basic Principle Used to Value an Asset Acquired in a Nonmonetary

question 74

Multiple Choice

The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:

• A) Fair value of the asset(s) given up.
• B) The book value of the asset given plus any cash or other monetary consideration received.
• C) Fair value or book value, whichever is smaller.
• D) Book value of the asset given.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Absorption Costing

An approach in accounting that comprises all costs of manufacturing, like direct materials, direct labor, and both types of manufacturing overheads (variable and fixed), in determining a product's cost.

Overproduction

The creation of more products or goods than are needed, leading to excess inventory and potential waste.

Variable Costing

An accounting approach that solely accounts for variable production expenses like direct materials, direct labor, and variable manufacturing overhead in the calculation of product costs.