Question

Sure Corp. operates under ideal conditions of certainty. It acquired its sole asset on January 1, 2015. The asset will yield $ 600 cash at the end of each year from 2015 to 2017, inclusive, after which it will have no market value and no disposal costs. The interest rate in the economy is 6%. Purchase of the asset was financed by the issu-ance of common shares. Sure Corp. will pay a dividend of $ 50 at the end of 2015 and 2016.

Required
a. Prepare a balance sheet for Sure Corp. at the end of 2015 and an income statement for the year ended December 31, 2015.
b. Prepare a balance sheet for Sure Corp. as at the end of 2016 and an income statement for the year ended December 31, 2016.
c. Under ideal conditions, what is the relationship between present value (i. e., value in use) and market value (i. e., fair value)? Why? Under the real conditions in which accountants operate, to what extent do market values provide a way to implement fair value accounting? Explain.
d. Under real conditions, present value calculations tend to be of low reliability. Why? Does this mean that present value- based accounting for assets and liabilities is not decision useful? Explain.



$1.99
Sales0
Views354
Comments0
  • CreatedSeptember 09, 2014
  • Files Included
Post your question
5000