Sure Corp. operates under ideal conditions of certainty. It acquired its sole asset on January 1, 2015.

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.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...