Asked by Evans Aidoo on Jun 24, 2024
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Byron Limited estimated the net present value of future cash flows from specialised equipment acquired under a business combination to be $120 000. A replacement cost for the equipment is estimated to be $132 000. The equipment has been independently appraised at a value of $122 000. A similar item of equipment cost the acquirer $118 000 last year. What is the value for recognition of the equipment under a business combination?
A) $118 000.
B) $122 000.
C) $120 000.
D) $132 000.
Specialised Equipment
Machinery or devices designed for a particular purpose or industry, often requiring specific knowledge or skills to operate.
Replacement Cost
The amount of cash or cash equivalent required to replace an asset at its current or similar utility.
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows over a period of time.
- Understand the critical role of fair value estimation in the accounting and valuation of assets and liabilities acquired in a business consolidation.
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Learning Objectives
- Understand the critical role of fair value estimation in the accounting and valuation of assets and liabilities acquired in a business consolidation.
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