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.