Balance sheets prepared in compliance with GAAP reflect a mixture ofA. historical cost and future cash values. B. current value and discounted future cash flows. C. discounted cash flows and future values. D. historical cost, fair value, net realizable value, and discounted present values.

Question

Rylee

Business

2 January, 11:54

Balance sheets prepared in compliance with GAAP reflect a mixture ofA. historical cost and future cash values. B. current value and discounted future cash flows. C. discounted cash flows and future values. D. historical cost, fair value, net realizable value, and discounted present values.

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Answers (1)

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Beau Kelley · Answer 1

D. historical cost, fair value, net realizable value, and discounted present values.

Explanation:

The objective of the Financial Statements is to show the economic reality of a company at a given time, but the elements that compose them have different nature and therefore for exposing and measurement each one, the criteria that best show reality can't be same for all of them. It also has to be taken into account that not all elements are destined for the same purposes.

The historical cost is used for goods that are intended to be used in the long term for the development of the company's activity; the fair value for those assets whose intention is to sell in the open market, the net realizable value is used to get an idea of how much income and expenses can be obtained with the credits and inventories and the discounted present value to obtain the value of the liabilities.