Questioncost allocationkeeping an asset suggests

Assignment Help Financial Accounting

Reference no: EM13350390

Question

Cost Allocation

Keeping an asset suggests reinvestment in the asset. Finance theory is reliable with the notion that reinvestment is at current value or replacement cost. Such a decision is seemingly based on comparing expected future cash flows that will be made by the asset and the cost of replacing it with a new one that may generate the same or different cash flows

According to the theoretical framework the drive of financial statements is to provide information regarding performance. Investment or else reinvestment decisions are a part of that performance. Yet, the historical cost of fixed assets is booked and allocated over following accounting periods

Required

a) Present arguments in favor of cost allocation

b) Does cost allocation provide relevant information?

c) Would a current-value approach to computation of fixed assets be preferable? Why?

d) Would a current-value approach be reliable with the physical capital maintenance concept? Describe

e) What problems as well as limitations are associated with using replacement cost for fixed assets?

Reference no: EM13350390

Questions Cloud

Questionin its intial month of operation moraine company : questionin its intial month of operation moraine company purchased 100 units of inven-tory for 6 then 200 units for 7

Question1a 32 percent efficient electric power plant : question1a 32 percent efficient electric power plant generates 700mw of electric power and discharges waste heat into

Questionon september 1 2011 a garage that had been acquired : questionon september 1 2011 a garage that had been acquired for 25000 on july 1 2002 and used wholly for mr. wardens

Question1a piece of aluminium specific heat 0910 kjkg 0c of : question1a piece of aluminium specific heat 0.910 kjkg 0c of mass 138 g at 74 0 c is dropped into a styrofoam cup

Questioncost allocationkeeping an asset suggests : questioncost allocationkeeping an asset suggests reinvestment in the asset. finance theory is reliable with the notion

Question1two gerbils run in place with a linear speed of : question1two gerbils run in place with a linear speed of 0.60 on an exercise wheel that is twisted like a hoop. find

Question1a 575g air-track glider attached to a spring with : question1a 575g air-track glider attached to a spring with spring constant 14.0 nm is sitting at rest on a frictionless

Question1- ph toy is uncertain of whether to sell its : question1- ph toy is uncertain of whether to sell its product assembled or else unassembled. the unit cost of the

Question1the diameter of the large piston of a hydraulic : question1the diameter of the large piston of a hydraulic press is 20 cm. and the area of the small piston is 0.50 cm2.

User Account

All Pages