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Sure Corp. operates under ideal conditions of certainty. It acquired its sole asset on January 1 , 2 0 1 5 . The asset will
Sure Corp. operates under ideal conditions of certainty. It acquired its sole asset on January The asset will yield $ cash at the end of each year from to inclusive, after which it will have no market value and no disposal costs. The interest rate in the economy is Purchase of the asset was financed by the issuance of common shares. Sure Corp. will pay a dividend of $ at the end of and
Required
a Prepare a balance sheet for Sure Corp. at the end of and an income statement for the year ended December
b Prepare a balance sheet for Sure Corp. as at the end of and an income statement for the year ended December
c Under ideal conditions, what is the relationship between present value ie value in use and market value ie 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 valuebased accounting for assets and liabilities is not decision useful? Explain.
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