Question 1

Which of the following is NOT an advantage of deprival cost accounting?&#10;A)it allows for the proper maintenance of the 'business substance'&#10;B)it values resources at expected proceeds if they are to be replaced.&#10;C)it provides a balance sheet based on current value.&#10;D)it is consistent with accounting concepts.

Accepted Answer

Deprival cost accounting values resources at the lower of replacement cost and recoverable amount, not at expected proceeds if they are to be replaced. This approach aims to reflect the economic loss that would be incurred if an asset were deprived, rather than focusing on the proceeds from replacement.

Question 2

Deprival value (DV)has a clearly definable concept of capital maintenance.

Accepted Answer

The concept of deprival value (DV) includes the idea of maintaining capital by estimating the cost of replacing or reproducing an asset that has been lost or damaged. This ensures that the value of the capital is maintained despite any losses or reductions in the value of the asset.

Question 3

The deprival value of an asset can be defined as the loss that a rational business person would suffer if deprived of the asset.

Accepted Answer

The deprival value of an asset is the value that a rational business person would place on the asset, taking into account the potential loss they would suffer if deprived of it. This can include lost revenue, increased costs or reduced productivity.

Question 4

Which of the following is NOT a disadvantage of deprival cost accounting?&#10;A)it is more subjective than replacement cost accounting.&#10;B)it fails to concentrate attention on long run attention on long run effectiveness.&#10;C)it fails to give information about the internal usefulness of assets.&#10;D)it is less realistic than replacement cost.

Accepted Answer

The statement "it is less realistic than replacement cost" is incorrect. Deprival cost accounting is actually considered more realistic than replacement cost accounting as it takes into account the actual loss of value of assets over time. A, B, and C are all disadvantages of deprival cost accounting.

Question 5

In a practical business context disposal value rarely matches replacement cost.

Accepted Answer

The answer of In a practical business context disposal value...

Question 6

Net realisable value can be defined as,&#34;the proceeds after deducting additional avoidable expenses of disposal&#34;.

Accepted Answer

Net realisable value is defined as the estimated selling price in the ordinary course of business minus the estimated costs of completion and the estimated costs necessary to make the sale.

Question 7

Edwards & Bell defined Current values as;&#10;A)values actually realized during the current period for goods sold.&#10;B)values potentially realized during the current period for goods to be sold.&#10;C)value of goods held during the current period.&#10;D)value of good acquired during the current period.

Accepted Answer

Current values are values that have actually been realized during the current period, specifically related to goods that have been sold. This does not include potential values or values related to goods held or acquired. Therefore, the best choice is A, values actually realized during the current period for goods sold.

Question 8

Which of the following is NOT a disadvantage of current exit value accounting;&#10;A)it fails to follow the going concern convention.&#10;B)it considered to be subjective.&#10;C)it only focusses on long- run operational effectiveness.&#10;D)it fails to give useful information about internal usefulness of assets.

Accepted Answer

Current exit value accounting actually focuses on short-term, rather than long-run, operational effectiveness. Therefore, option C is not a disadvantage of current exit value accounting.

Question 9

Which of the following is NOT an advantage of current exit value accounting;&#10;A)it follows the economic 'opportunity cost' principle.&#10;B)exit values facilitate comparison.&#10;C)the concept of realisable value is best understood by professional accountants.&#10;D)it is already widely used.

Accepted Answer

The statement that "the concept of realisable value is best understood by professional accountants" is not necessarily true as it can be understood by anyone with basic accounting knowledge. Therefore, this is not an advantage of current exit value accounting.

Question 10

Replacement cost valuations are usually more subjective than deprival valuations.

Accepted Answer

Deprival valuations are typically more subjective because they consider the specific circumstances and utility of the asset to the owner, including replacement cost, value in use, and net realizable value, which can vary greatly and involve more assumptions. Replacement cost valuations, on the other hand, are more straightforward, focusing on the cost to replace an asset with a new one of similar function and efficiency.

Deck 6: Current Exit Value and Mixed Values