The Most Conceptually Appropriate Method of Valuing a Liability Under

question 42

Multiple Choice

The most conceptually appropriate method of valuing a liability under the historical cost basis is to

• A) discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date the liability was initially incurred.
• B) discount the amount of expected cash outflows that are necessary to liquidate the liability using the market rate of interest at the date financial statements are prepared subsequent to issuance.
• C) record as a liability the amount of cash or cash-equivalent value that the company would be required to pay to eliminate the liability in the ordinary course of business on the date of the financial statements.
• D) record as a liability the amount of cash or cash-equivalent proceeds actually received when a liability was incurred.

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Definitions:

Correlation Coefficient

A statistical measure that indicates the extent to which two variables change together.

Correlational Study

A type of research method that examines the relationship between two or more variables without determining causality.

Variables

elements, features, or factors that are liable to vary or change within a research or experimental design.

Psychological Research

The systematic investigation into the mind and behavior through controlled experiments, observations, and analysis.