The following are hypothetical situations that require the choice of one of the two bases of measurement: cost or fair value.
1. You purchase your textbooks at the university bookstore to use during the term, but plan on selling them at the end of the term.
2. You purchase a new iPad and plan on never parting with it, at least not until a new model comes out.
3. You purchase soft ware for your computer under a special deal that allows you to upgrade it whenever a new version is released.
4. You purchase a used car.
5. You purchase land, which you eventually hope to build a home on.
Instructions
(a) Identify the advantages and disadvantages of each of the two bases of measurement: cost and fair value.
(b) For each of the above situations, identify which basis of measurement would be the most appropriate to choose, and explain why.