Answer to Question #305008 in Management for maddie damie

Question

Mr. ABC acquired his business for P3 million. The  Fair Market value of the business is P5 million.  Question: 

Will it be more useful if accounting records were  adjusted corresponding to the fair market value  amount of the business? Justify your answer.

Answer 1

Yes. The adjustment will

help in recognizing the correct assets and liabilities of the business. Also, it will help in ascertaining the amount of tax to be paid. The value of the assets one has, wants them to be relative to the external market. Something is only as valuable as someone else is willing to pay you for it