12.

Fair market value can decrease the

TRUE OR FALSE company's asset value listed on its
balance sheet. ​(FALSE; increase)
1. Earnings are measured on a cash basis
13. In terms of liquidity, a cost balance
rather than an accrual basis. ​(False)
sheet could reveal more worth and
2. The direct method of reporting cash flow
better creditworthiness than the fair
statements is where major classes of
market value balance sheet. ​(FALSE;
gross cash receipts and gross cash
fair market value balance sheet)
payments are disclosed. ​(True)
14. Calibration has ​one objective​. ​(False;
3. Effective January 1, 2015, PAS 39 was
two objectives)
superseded by PFRS 9. ​(True)
15. In order to perform a fair value
4. Book Value refers to an “exit price” or
measurement, an entity needs to
market price under current market
undertake an in-depth search of all
conditions at measurement date.
possible markets to identify the principal
(False; Fair Value)
market or, in the absence of a principal
5. Cost approach Focuses on converting
market, the most advantageous market.
future amounts into discounted cash
(False)
flows. ​(False; Income Approach)
16. Changes in the fair value of derivative
6. Legally permissible reflects any legal
instruments used as fair value hedges
restrictions on the use of assets. ​(True)
will always exactly offset the change in
7. Cost approach uses prices and relevant
the fair value of the asset, liability, or
information for market transactions for
firm commitment being hedged. ​(False)
identical and comparable asset and
17. The asset, liability, or firm commitment
liability. ​(False; market approach)
hedged by a derivative instrument must
8. The fair value shall be adjusted for
be adjusted to fair value at the end of
transaction cost. ​(False; shall not)
each fiscal period.​ ​(True)
9. Market Approach is another common
18. Fair value does not apply to all assets. It
method of valuation and is based on the
is usually estimated for current assets
concept that the actual value of a
that are held for resale such as
business lies in the ability to produce
marketable securities. ​(True)
revenue, profit and eventually wealth in
19. Book value is the historical value of an
the future. ​(False; Earnings Approach)
asset on a company’s balance sheet.
10. Earnings Approach is behind the
(True)
concept that the value of business can
20. Book value is referred to as an estimate
be determined by reference to
of the potential value of an asset.
reasonably comparable guideline
(False; Fair value)
companies for which transaction values
21. IFRS 13:34 provides that a fair value
are known. ​(False; Market Approach)
measurement of a financial or
11. The idea behind the market approach is
non-financial liability or an entity's own
that the value of the business can be
equity instruments assumes it is
determined by reference to reasonably
transferred to a market participant at the
comparable guideline companies for
measurement date, without settlement,
which transaction values are known.
extinguishment, or cancellation at the
(True)
measurement date. ​(TRUE)
22. IFRS 13:24 provides that a fair value 33. Selling price refers to what it would cost
measurement assumes an orderly to buy or build a similar property or
transaction between market participants asset. ​(False)
at the measurement date under current 34. Comparative analysis is the most
market conditions. ​(FALSE; IFRS common method to calculate fair market
13:15) value. ​(True)
23. IFRS 13:24 provides that a fair value 35. The market approach uses appraisal
measurement assumes a transaction methods that consist of a review of the
taking place in the principal market for individual assets of the company.
the asset or liability, or in the absence of (False)
a principal market, the most
advantageous market for the asset or
liability. ​(TRUE)
36. Historical cost is the transaction price or
24. Intrinsic value might or might not be the
the acquisition price at which the asset
same as the fair market value. ​(True)
was acquired, or transaction was done,
25. The fair market value is ​not calculated
while Fair value is the market price that
by taking the average of the highest and
an asset can fetch from the
lowest selling prices of the day. ​(False)
counterparty. ​(True)
26. The three valuation approaches are
37. Eminent domain is another area where
income approach, the control approach
fair market value is often not relevant,
and the cost approach. ​(FALSE;
because the person losing his or her
MARKET APPROACH)
property is under compulsion. ​(True)
27. In practice, some owners are not wholly
38. In assessing the fair market value, one
rational about the asset they own,and
of the basic methods is the book value
some assets are valuable for
and financial status of the company.
non-financial reasons. ​(TRUE)
(False)
28. In other cases, it may not be appropriate
39. Are worldwide tax authorities always
for a tribunal to depart from FMV and
ensuring that transactions are realized
move towards equitable value as a
at fair market value, at least for tax
basis for assessing damages. ​(FALSE;
purposes? ​(True)
IT MAY BE APPROPRIATE)
40. Fair value fluctuates more than market
29. Property appraisal is a thorough and
value. ​(FALSE)
detailed assessment performed by an
41. Market value is dependent on supply
independent professional appraiser.
and demand in the market where the
(True)
asset is bought and sold. ​(TRUE)
30. Comparative Market Analysis helps in
42. Fair value focuses on assets and
determining the asking price for a home.
liabilities because they are primarily
(True)
subject to accounting measurement.
31. There is no official way to determine
(TRUE)
Fair Market Value of properties in the
43. The carrying value generally reflects
Philippines. ​(True)
equity. ​(TRUE)
32. Fair market value is the price that an
44. Fair value is the price at which an
asset would sell for on the close market.
orderly transaction to sell an asset or to
(False)
transfer a liability would take place
 between market participants at the paid to transfer a liability. ​(False; Exit
reporting date under current market Price)
conditions. ​(FALSE) 57. Generally accepted accounting
45. Both buyers and sellers are reasonably principles (GAAP) require the use of fair
and equally knowledgeable about the value accounting for all assets and
asset under consideration. ​(TRUE) liabilities. ​(False)
46. Cooperative analysis is the most 58. Fair value is the market price that would
common method to calculate fair market be received if an investment were sold.
value. ​(FALSE; comparative analysis)​. (True)
47. Insurance companies also use FMV to 59. Cost Method is an appropriate method
determine the damage or compensation for accounting for small stock
that has to be paid. ​(TRUE) investments. ​(True)
48. The total amount of stockholders equity 60. Amortized Cost is the value assigned to
reported on the balance sheet is held-to-maturity securities. ​(True)
intended to show the fair value market 61. Fair value refers to an "exit price" or
of the corporation. ​(False) market price under current market
49. Land, building, equipment, inventories conditions at measurement date. ​(True)
are examples of business expenses. 62. Income approach relies on the current
(False) replacement cost to replace the asset
50. Fair Value Hierarchy : GAAP provides a with a comparable asset. ​(False)
hierarchy of information sources that 63. Fair market value refers to the price at
range from Level 1 (best) to Level 5 which both transacting parties have
(worst). ​(False; Wrong Word : 5 agreed to independently. ​(True)
Correct Answer : 3) 64. The fair market value of the property is
51. The resulting change in fair value that then a fair valuation, or an assessment
re-measured periodically has an impact of its worth. ​(True)
on net income. ​(True) 65. The fair market value of an immovable
52. Fair value is defined as the price at property shall be higher of its cost of
which a business would change hands acquisition. ​(True)
between a willing buyer and willing 66. In operation, it refers to an asset's sale
seller. ​(False) price arranged by a willing buyer and
53. Book Value is an accounting concept seller, assuming both parties are
used to compute the difference between knowledgeable and enter the
a company's total assets and total transaction freely. ​(False)
equities. ​(False) 67. Fair value represents the potential price,
54. Fair market value is the statutory or the worth assigned, to an honest or
standard of value. ​(False) service, taking under consideration its
55. Entry Price is the price paid to acquire utility, supply and demand for it, and
an asset or received to assume a also the amount of competition for it.
liability in an exchange transaction. (True)
(True) 68. The owner capital is used to designate
56. Fair value is an enter price in the the amount by which current assets
principal market and it is the price that exceed current liabilities. ​(False;
would be received to sell an asset or Working Capital)
69. Earnings are measured on an accrual 82. Fair value of an asset is the price that
basis rather than cash basis. ​(True) would be received to sell an asset in an
70. Fair market value is similar to market orderly transaction between market
value and appraised value ​(False; participants. ​(True)
different) 83. Fair-value accounting is also called as
71. The fair market value is the price an market(mark)-to-market accounting.
asset would sell for on the open market (False)
when certain conditions are met. ​(True) 84. Fair value provides more accuracy when
72. Fair value fluctuates more than Market it comes to current valuations from
value. ​(False) assets, liability and equity. (equity is not
73. Market approach is a method of included) ​(False)
determining the value of an asset based 85. If fair values indicate a fall, possible
on the selling price of different assets. losses will be reflected on the banks´
(False) capital. ​(True)
74. One of the costs of providing information 86. Both parties must be free of any undue
is the costs associated with danger of pressure to execute the transaction.
litigation. ​(True) (True)
75. One format of income statement is the 87. A reasonable amount of money must be
multiple-step format. ​(True) available to execute the transaction.
76. One of the disadvantages of market (False; amount of time)
approach is not dependent on 88. Only buyers are seeking to further
subjective ​forecasts. ​(False) their best respective financial
77. Being straightforward and involves interests and are not under
simple computation is an advantage of pressure to act. ​(False)
market approach. ​(True)
78. The Precedent Transaction Method 89. The fair market value is calculated
entails using valuation metrics from by taking the average of the
companies that have been traded highest and lowest selling prices of
publicly, which are considered to be the day. ​(True)
rightly similar to the subject entity. 90. Market value is an opinion of
(False) the most probable buy-sell price.
79. The market approach is a method of (True)
determining the value of a capital based 91. Fair market value is a general
on the selling price of similar capital. type of market value. ​(False)
(False) 92. The fair market value of
80. Level 1 inputs are quoted prices in an non-publicly traded stock is more
inactive market for identical assets or complex.​(True)
liability. ​(False; should be active
market) 93​.​An active market is a market in
81. Investment Value is the value to a which transactions for the asset or
specific buyer or investor often based on liability take place with sufficient
perceived synergies when the business regularity and volume to provide pricing
is combined with another business. information on an ongoing basi​s.​(TRUE)
(True)
 94​.​A principal market is the c. Operating Profit
market with the greatest d. Other Income
volume and level of activity 3. Which of the following is not a valuation
for the asset or method technique used in fair value
liability.​(​TRUE) measurement?
a. Income Approach
95​ ​Market approach is another b. Residual Value Approach
common method of valuation c. Market approach
and is based on the concept d. Cost approach
that the actual value of a 4. The fair value of an asset should be
business lies in the ability to based upon
producer venue, profit and a. The price paid to acquire the
eventually wealth in the asset
future.​(​FALSE,EARNING b. The price that would be
APPROACH) received to sell the asset at the
measurement date
96​ ​Under fair value hedge c. The price paid to transfer or sell
accounting, the derivative must the asset
be recorded at fair value with d. The carrying amount of the asset
changes in fair value presented acquired
in the same income statement 5. What method can an earning approach
line item as the earnings effect use?
of the hedged item.​(​TRUE) a. Empirical/Statistical
b. Discounted future earnings
97​ ​There is less of an c. Heuristics
opportunity to manipulate d. Cost
accounting data using the fair 6. How many methods does the market
value approach.​(​TRUE) approach have?
a. 1
MULTIPLE CHOICE b. 4
c. 3
1. The following are several costs of
d. 2
providing accounting information except:
7. Empirical/Statistical approaches
a. costs of auditing
composed of how many methods?
b. costs associated with dangers of
a. 1
litigation and loss of competitive
b. 2
advantage
c. 3
c. costs of sale
d. 4
d. costs collecting, processing, and
8. ______ is another common method of
disseminating
valuation and is based on the concept
2. The first step of profit measurement on
that the actual value of a business lies in
the multiple-step income statement and
the ability to produce revenue, profit and
is a key analytical tool in assessing a
eventually wealth in the future.
firm’s operating performance.
a. Cost Approach
a. Cost of Goods Sold
b. Income Approach
b. Gross Profit
 c. Market Approach d. is directly observable or
d. Earning Approach readily available
9. Focuses on converting future amounts 15. EBITDA means ...
into discounted cash flows. a. earnings before income, taxes,
a. Market approach depreciation, and amortization
b. Income approach b. earnings before interest, taxes,
c. Cost approach depreciation, and accounting
d. Earning Approach c. earnings before interest, taxes,
10. The idea behind this valuation approach depreciation, and amortization
is that the value of the business can be d. earnings before interest,
determined by reference to reasonably t-accounts, depreciation, and
comparable guideline companies for amortization
which transaction values are known. 16. What is the 1st objective of Calibration?
a. Market Approach a. it determines the traceability of
b. Comparable transactions the measurement. In practice,
Approach calibration also includes repair of
c. Earnings Approach the device if it is out of
d. Pricing Multiple Approach calibration.
11. This uses expert opinions of b. used in the valuation model such
professional practitioners. that at the transaction date
a. Empirical Approach c. It is best practice to use the
b. Heuristic Pricing Model transaction price
c. Statistical Approach d. it checks the accuracy of the
d. Relative Valuation Approach instrument.
12. It reflects any legal restrictions on the 17. The book value of an asset is equal to
use of assets. the
a. Legally permissible a. asset's fair value less its historical
b. Physically possible cost.
c. Highest and best use b. blue book value relied on by
d. Financially feasible secondary markets.
13. It reflects the physical characteristics of c. replacement cost of the asset.
an asset. d. asset's cost less accumulated
a. Legally permissible depreciation.
b. Physically possible 18. The definition of fair value focuses on
c. Highest and best use __________ because they are a primary
d. Financially feasible subject of accounting measurement.
14. In determining the fair value of an asset a. Assets and liabilities
or a liability, an entity may refer to b. Rights and obligations
information that… c. Observable and unobservable
a. is indirectly observable or readily inputs
available d. Entry price and exit price
b. is directly observable or readily 19. Its concept arises from the practice of
unavailable recording the assets on the balance
c. is indirectly observable or readily sheet at its historical cost.
unavailable a. Financial statement
 b. Book value b. Sellers
c. Income statement c. Buyers and Sellers
d. Fair value d. None of the above
20. It is the estimated worth of a company's 25. It is an opinion of the most probable
assets and liabilities that are listed on a buy-sell price. It reflects the probable
company's financial statement. amount of money a buyer would pay
a. Book value and a seller would accept for an item of
b. Income statement property under specific conditions.
c. Fair value a. Imposed Value
d. Balance sheet b. Fair Market Value
21. The ____________reflects c. Market value
non-performance risk (the risk the entity d. Discount
will not fulfil an obligation), including an 26. All three approaches rely on two
entity's own credit risk and assuming the fundamental principles:
same non-performance risk before and
a. that the owner of an asset has no
after the transfer of the liability [IFRS
special reason to want to own the asset
13:42]
apart from its ability to generate a
a. fair value of an asset
return,
b. fair value of a liability
c. fair value of non-financial asset b. that the owner is not impartial about
d. fair value of non-financial liability the assets if they are all capable of
22. An optional exception applies for certain generating the same expected income
_____________and financial liabilities with the same likelihood.
with offsetting positions in market risks
or counterparty credit risk, provided a. Statement A only
conditions are met (additional disclosure b. Statement A and B
is required). [IFRS 13:48, IFRS 13:96] c. Statement B only
a. financial assets d. None of the above
b. financial instruments
c. non-financial assets
d. non-financial liabilities 27. The most common circumstances when
23. It is a measure of what an asset is a tribunal may be required to decide the
worth. This measure is arrived at by FMV of an asset are:
means of an objective calculation or I. when a party has been deprived of an
complex financial model, rather than asset (for example, an expropriation) –
using the currently trading market price the damage may be measured as the
of that asset. FMV of the lost asset;
a. Book Value II. when an asset has not been harmed –
b. Fair Value the damage may be measured as the
c. Depreciation FMV of the undamaged asset less the
d. Intrinsic Value FMV of the damaged asset; and
24. Seeking to further their best respective III. when a party has been misled (caused,
financial interests and are not under for example, by a breach of warranty) –
pressure to act. the damage may be measured as the
a. Buyers difference between the FMV of the asset
 in the condition promised and its actual 33. Uses the estimated cost to replace an
FMV. asset, adjusted for the obsolescence of
a. Statement I only the existing asset.
b. Statement I and II only a. Market approach
c. Statement I and III only b. Income approach
d. Statement I, II, III c. Cost approach.
28. Which of the following is NOT a Fair 34. Which of the following is an effective
Market Value Condition? way for estimating the fair value market?
a. No pressure to make the trade a. Comparative market analysis
b. The transaction is not too rushed b. Appraisal
c. Trade serves best interest of both c. Both a and b
parties d. None of the above
d. One party know the relevant 35. _______ is a highly subjective matter,
facts and is also the base for all the
29. Which of the following usually prepares transactions, business analysis and
the Comparative Market Analysis? all mergers and acquisitions deals.
a. Appraiser a. Fair Value
b. Real estate professionals b. Valuation
c. Accountant c. Historical Cost
d. Financial advisor d. Value
30. It refers to the price at which one can 36. _____ are often assessed based on the
purchase an asset under normal market fair market value of the owner’s
conditions. property.
a. Replacement Cost a. Property Taxes
b. Selling Price b. Insurance claim
c. Fair Market Value c. Purchase price
d. Sunk Cost d. None of the above
31. Uses estimated future cash flows or 37. The following are the three valuation
earnings, adjusted by a discount rate approaches to arriving at FMV of an
that represents the time value of money asset Except?
and the risk of cash flows not being a. income approach
achieved, to derive a discounted present b. market approach
value. c. fair approach
a. Market approach d. cost approach
b. Income approach 38. Fair market value is the price at which
c. Cost approach. the buyer is willing to ____ and the
32. Uses the prices associated with actual seller is willing to ____.
market transactions for similar or a. choose, sell
identical assets and liabilities to derive a b. pay, choose
fair value. c. sell, borrow
a. Market approach d. pay, sell
b. Income approach 39. Which financial statement reports the
c. Cost approach adjustment for changes in the market
value of available-for-sale investment
 securities and adjustment for foreign 44. A change from the cost approach to the
currency translation? market approach of measuring fair value
a. Balance sheet is considered to be what type of
b. Income statement accounting change?
c. Statement of cash flows a. Change in Accounting
d. Statement of comprehensive Estimate
income b. Change in Accounting Policy
e. Statement of changes in equity c. Change is Coming
f. Notes to financial statements d. Stock Exchange
g. None of the above
h. All of the above
40. Comprehensive income is defined as
(blank) plus other comprehensive
income 45. Use prices generated by real market
a. Extraordinary items transactions for identical or similar
b. Ordinary items items.
c. Gains and losses a. Market Approach
d. Net income b. Income Approach
e. Gross income c. Liability Approach
f. Passive income d. Cost Approach
g. All of the above 46. The __________________ involves
41. A corporation working capital is determining the changes in future cash
calculated using what amounts flows based on cost savings or revenue,
a. Total assets and total liabilities which is generated through intangible
b. Total liabilities and total equity assets.
c. Total asset and total equity a. Residual value method
d. Current asset and current b. Excess earnings method
liabilities c. Immediate cash flow method
e. Current liabilities current equity 47. The ____________ involves two
f. Current equity and current asset approaches to determining fair value –
42. The price that would be received to sell the cost of reproduction and the cost of
an asset or paid to transfer a liability. replacement.
a. Fair market value a. Market Approach
b. Net Income b. Cost Approach
c. Contract Value c. Income Approach
d. Passive Income 48. The basis of this approach is the
43. A market in which transactions for the discounting of all relevant cash flows
asset or liability take place with sufficient with a risk-equivalent interest rate on the
frequency and volume to provide pricing day of valuation.
info on an ongoing basis. a. Cost Approach
a. Supermarket b. Income Approach
b. Active Market c. Market Approach
c. Market Market 49. It involves differentiating between the
d. Quoted Market use of current market prices and the use
 of analogies when it comes to defining 55. All of the following are factors
fair market value. contributing to the trend for regulators to
a. Income Approach adopt accounting principles using fair
b. Market Approach value concepts except:
c. Cost Approach a. Hybrid measurement methods
50. This is not really a standard value. within GAAP that conflict with
a. book value each other.
b. fair market value b. A greater percentage of total
c. fair value assets existing as receivables
d. Liquidation value and securities.
51. This is the value to a specific buyer or c. The ease of applying market
investor. values to assets and liabilities.
a. Liquidation value d. None of the above
b. Investment value 56. All of the following are disadvantage of
c. Fair value fair value use except:
d. Buyer value a. Fair value may not be readily
obtainable.
b. Fair values can only be used
on balance sheet accounts.
c. Fair values may cause more
fluctuations as change occurs
from time to time.
52. It is based on the economic belief that d. Both A and B
informed buyers will not pay any more 57. It is the appropriate method for
for a product than they would for the accounting for small stock investment.
cost of producing a similar product that a. Equity method
has the same level of utility. b. Cost method
a. Income Approach c. Income method
b. Cost Approach d. All of the following are
c. Market Approach appropriate.
53. Used to determine the appraisal value of 58. Which of the following statements is
a business, intangible asset, business incorrect regarding the inputs that can
ownership interest, or security by be used to measure fair value?
considering the market prices of I. Level I inputs are the most
comparable assets or businesses that reliable fair value measurements
have been sold recently or those that and Level III inputs are the least
are still available. reliable.
a. Income Approach II. Level I measurements are quoted
b. Cost Approach prices in active markets for
c. Market Approach identical or similar assets or
54. Estimates the market value of a property liabilities.
based on the income of the property. III. A fair value measurement based
a. Income Approach on management assumptions
b. Cost Approach only (no market data) would not
c. Market Approach be acceptable per GAAP.
 IV. The level in the fair value value measures during the
hierarchy of a fair value period.
measurement is determined by c. Extent to which fair value is
the level of the highest level used to measure assets and
significant input. liabilities at the measurement
a. I only. date, the valuation techniques,
b. I, II, and IV. inputs and assumptions used
c. II, III, and IV. to measure fair value and the
d. I, II, III, and IV effect of fair value measures
59. Which of the following statements on operations.
regarding fair value is/are correct? d. Description of how fair value is
I. The fair value of an asset or determined and the effects of
liability is specific to the entity changes in assets and liabilities,
making the fair value measured through fair value,
measurement. during the period.
II. Fair value is the price to acquire
an asset or assume a liability.
III. Fair value includes transportation
62. When considering an exit price, what is
costs, but not transaction costs.
the best description for a principal
IV. The price in the principal market
market?
for an asset or liability will be the
a. The market in which the entity's
fair value measurement.
common stock is listed and trade
a. I & II
b. The market in which the
b. I & IV
reporting entity would sell the
c. II & III
asset or transfer the liability
d. III & IV
with the greatest volume and
60. A change from the cost approach to the
level of activity
market approach of measuring fair value
c. The market that the most
is considered to be what type of
experienced broker/dealer for the
accounting change?
specific asset or liability would
a. Change in accounting
use to sell the asset or transfer
estimate.
the liability
b. Change in accounting principle.
d. The market in which the entity
c. Change in valuation technique.
believes that, after a reasonable
d. Error correction.
period of time, it can receive the
61. The disclosures related to fair value
highest amount for the asset or
measures are designed to provide users
the highest amount to transfer the
of financial statements with
liability
a. Amount and classification of fair
63. What are the primary valuation
value assets and liabilities as of
techniques identified in ASC 820 and
the balance sheet date.
IFRS 13?
b. Amount and classification of fair
a. Composite national average
value measures as of the balance
asset/liability approach, average
sheet date as well as the
amounts of the changes in fair
 fair value approach and 66. Which of the following describes a
discounted cash flow approach principal market for establishing fair
b. BS & C Index, Case-Shriller Fair value of an asset?
Value Index and cost approach a. The market that has the
c. Market approach, income greatest volume and level of
approach and cost approach activity for the asset
d. Observable market prices that b. Any broker or dealer market
are comparable to the asset or c. The most observable market
liability being measured at fair d. The market in which the amount
value received would be maximized
64. What is the order of priority of the 67. Which of the following is an assumption
following measurements for determining used in fair value measurement?
the fair value of a financial liability? a. The asset must be in-use
a. Quoted price in an active market for the b. The asset must be considered
identical liability held by another party as in-exchange.
an asset c. The most conservative estimate
b. Quoted price in an active market for must be used
similar liabilities d. The asset is in the highest and
c. Quoted price in an inactive market for best use
the identical liability held by another 68. Which of the following would meet the
party as an asset qualifications as market participants?
d. Quoted price in an active market for the a. An independent entity that is
identical liability knowledgeable about the
1. a, d, c, b asset.
2. d, a, b, c b. A liquidation market in which
3. d, a, c, b sellers are compelled to sell.
4. a, d, c, b. c. A subsidiary of the reporting unit
65. Statement 1: When property, plant and interested in purchasing assets
equipment are revalued, the entire class similar to those being valued.
should be revalued. d. A broker or dealer that wishes to
establish a new market for the
Statement 2: The assets within a class asset.
of property, plant and equipment are 69. According to IRS, these are the criteria
revalued simultaneously in order to that needs to establish fair market value
meet selective revaluation of assets and except:
the reporting of amounts which are a a. Only the seller has full
mixture of cost and value at different knowledge of the property, its
dates. condition, and all relevant facts
pertaining to it.
a. True:False
b. The property would likely sell for
b. False:True
this price on the open market.
c. True:True
c. Both the buyer and the seller are
d. False:False
willing to enter into the
transaction at this price.
 d. No restrictions have been placed not considered as cash equivalent or
on how the property can be used. held for trading purposes.
70. The definition of fair value focuses on a. Investing activities
__________ because they are a primary b. Operating activities
subject of accounting measurement. c. Financing activities
a. Rights and obligations 77. The value described by an arm’s length
b. Entry price and exit price transaction between a knowledgeable
c. Assets and liabilities willing buyer and a knowledgeable
71. Significance of fair market value. willing seller.
a. Asset, Liability, Equity a. Market Value
b. Legal situations, Taxation, b. Replacement Cost
Insurance c. Appraised Value
c. Investing, Operating, Financing d. Fair Market Value
72. In __________, fair value represents the 78. All of the following are the basic
estimated worth of varied assets and methods in determining fair market
liabilities that has got to be listed on a value ​except​:
company's books. a. Replacement Cost
a. Accounting b. Cost or Selling Price
b. Operating c. Seller’s Opinion
c. Investing d. Sales of comparable assets
73. The method of price discovery 79. It is the price an asset would fetch in the
employed by professionals in such a marketplace.
situation is understood as __________. a. Fair Market Value
a. Appraisal b. Market Value
b. Discard c. Appraised Value
c. Brand d. Book Value
74. Uses the prices associated with actual
market transactions for similar or
identical assets and liabilities to derive a
80. Primary advantage of Fair Market Value
fair value.
Approach?
a. Income approach
a. It can be impractical in situations
b. Cost approach
where few if any comparable
c. Market approach
transactions exist.
75. Obtaining resources from and returning
b. It is most useful when there is no
resources to owners as well as
substantial data available
obtaining resources through borrowings
regarding recent sales of
and repayments of the amounts
comparable assets.
borrowed.
c. It is based on publicly available
a. Investing activities
data on comparable
b. Operating activities
transactions.
c. Financing activities
d. Both a and b
76. The acquisitions and disposition of
81. In situations where limited data is
property, plant and equipment and other
available, the valuator may need to rely
long term assets and debt and equity
on alternative methods such as
instruments of other enterprises that are
 a. cost approach 86. Which of the following is an example of
b. discounted cash-flow analysis market approach method?
c. neither a and b a. Valuation method
d. both a and b b. Income approach
82. (I) the market approach seeks to answer c. Precedent transaction
the question, “what is the fair value of d. Fair market value
this asset? (II) Market value is 87. It involves deriving value using pricing
dependent on supply and demand in the multiples that are based on observed
market where the asset is bought and transactions of companies in the
sold. industry of the subject company.
a. Both statements are true a. Public Company Comparables
b. Both statements are false b. Precedent Transactions
c. Only (I) is true c. Transaction Method
d. Only (II) is true d. None of the above
83. In accounting discontinuing operations 88. Which of the following is not an
in the income statement, results of advantage of market approach?
continuing operations are: a. The method raises questions
a. Shown together with the on how much data is available
operating results of discontinued and how good the data is.
portion b. It is straightforward and involves
b. Not shown simple calculations.
c. Shown separately with the c. It uses data that is real and
operating results of public.
discontinued portion d. It is not dependent on subjective
d. Ignored forecasts.
84. The expenses enlisted are all 89. One of the most commonly used
considered Operating Expenses except statistic that the amount is generated by
for: the business before taking account of its
a. Interest Expense financing, the replacement of fixed
b. Utilities Expense assets and tax (which is affected by
c. Advertising Expense non-operating decisions).
d. Depreciation and amortization a. Profit after tax
85. It is one of the significant problems that b. Tax
confronts the user of financial c. Book value
statements where a great quantity of d. Earnings before interest, tax,
information is required and therefore depreciation and amortization
makes the financial statements 90. It relies on information on the asset
overwhelming and intimidating. itself, in the form of views as to the likely
a. Volume of Information future income that an asset can
b. Complexity of accounting rules generate.
c. Quality of Financial Reporting a. Approachable
b. Market Approach
c. Income Approach
d. Approaching Cost
91. An exit price is an ___
 a. It is the price to sell an asset d. If fair value goes up, financial
rather than the price to buy documents are adjusted; if fair
one. value goes down, nothing is
b. It may be based on the most changed
recent pricing or quotation of an 96. This approach is a method of
asset. determining the values of an asset
c. It is straightforward and involves based on the selling price of similar
simple calculations. assets
d. It is not an entity- specific a. Unicorn
measurement. b. Income approach
92. ____________ is the market with the c. Market Approach
greatest volume and level of activity for 97. Fair market value is used to assess the
the asset or liability. municipal property taxes to be paid by
a. Sales of comparable assets an owner.
b. Insurance a. Taxation
c. Principal Market b. legal situations
93. _____________ is the market that c. unicorn
maximizes the amount that would be 98. Refers to the price at which both
received to sell the asset or minimizes transacting parties have agreed to
the amount that would be paid to individually
transfer the liability, after taking into a. Fair Market Value
account transaction and transportation b. incremental value
costs. c. unicorn
a. Principal Market
b. Most Advantageous Market IDENTIFICATION
c. Replacement Cost
1. ______ Legally possible, meaning, it
94. What are two common ways to measure
reflects any legal restrictions on the use
fair value?
of liability. ​(assets)
a. Market Value and Cost
2. ______ The highest and best use of the
b. COGS and Accounts Receivable
asset might provide minimum value
c. Liquidation and Cost
neither on a stand-alone basis or as a
d. Market Value and Discounted
group. ​(maximum) (either)
Paper
3. An active market is the market with the
95. How does fair value affect financial
greatest volume and level of activity for
statements?
the asset or liability. ​(principal market)
a. If the fair value of an item goes
4. A basis for a company specific risk
up or down, it could change
premium also known as the ________.
the asset value on financial
(Alpha)
statements
5. __________ is a technique whereby an
b. Financial statements have a
observed transaction price as of an
specific line for fair value of all
investment date is used. ​(Calibration)
items
c. The value of items does not
affect financial statements