TestBank VC Module3
TestBank VC Module3
TRUE OR FALSE: Write TRUE if the statement is correct and FALSE if the
statement is incorrect.
TRUE 1. Age of the asset it is important to know how old the asset is.
TRUE 2. The National Associations of Valuators and Analysts has defined
the replacement cost as the cost of similar assets that have the nearest
equivalent value as of the valuation date.
FALSE 3. Under the replacement value method, the value of the individual
assets shall be replace to reflect the relative value or cost equivalent to replace
that asset.
TRUE 4. Appraisers have their own technique to determine the
replacement value.
TRUE 5. The National Associations of Valuators and Analysts has defined
the replacement cost as the cost of similar assets that have the nearest
equivalent value as of the valuation date.
TRUE 6. In some instances, no external information is available that can
serve as basis for replacement cost of assets that are highly specialized in
nature. In this case, reproduction value is used instead.
TRUE 7. Reproduction is an estimate for cost of reproducing, creating,
developing or manufacturing a similar asset.
TRUE 8. The book value is highly dependent on the value of the assets
and declared in the audited financial statements, particularly the balance sheet
on the statement of financial position.
FALSE 9. International Accounting Standard No. 1 does not require the
statement of financial position to summarize the total value of its assets,
liabilities, and equity of a firm.
TRUE 10. Reproduction Value Method is useful when calculating the
value of new or start-up Businesses and ventures that use specialized equipment
or assets.
TRUE 11. Assets are required to be categorized into current and non-
current assets.
TRUE 12. Assets wherein benefits can be realized in more than 12
months are known as non-current assets.
TRUE 13. In the book value method, the value of the enterprise is based
on the book value of the assets less all non-equity claims against it.
FALSE 14. Replacement value method and reproduction value method has
the same concept.
TRUE 15. The challenge of using reproduction value method is the ability
to validate the reasonableness of the value calculated.
MULTIPLE CHOICE
16. Assets which have distinct characteristics are hard to replace. However,
the characteristics and capabilities of the distinct asset might be found in
similar, separate assets. Some valuators combine the value of the similar,
separate assets that can perform the function of the distinct asset being
valued.
a. Replacement Value Method
b. Age of the asset
c. Competitive advantage of the asset
d. Book Value
17. It is important to know how old the asset is. This will enable the valuator to
determine the costs related in order to upkeep a similarly aged asset and
whether assets with similar engineering design are still available in the
market.
a. Replacement Value Method
b. Age of the asset
c. Competitive advantage of the asset
d. Book Value
18. This is important for fixed assets particularly real property where assets of
the similar size will be compared. Some analysts find that the assets can
produce the same volume for the assets of the same size.
a. Book Value
b. Liquidation Value Method
c. Production Value
d. Size of the assets
19. Defined the replacement cost as the cost of similar assets that have the
nearest equivalent value as of the valuation date.
a. National Associations of Valuators and Analysts
b. International Valuation Standards Council
c. World Association of Valuation Organizations Sign
d. Security and Exchange Commission
20. The cost of similar assets that have the nearest equivalent value as of the
valuation date.
a. Based Valuation
b. Replacement cost
c. Economic Value
d. Market Cost
21. Statement 1: Current assets are those expected to be realized within the
company’s normal operating cycle, expected to be realized
within 12 months after these transactions were reported, or
held primarily for the purpose of trading.
Statement 2: Cash and cash equivalents may also be included only if it is
not restricted.
Which statement is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither Statement
22. To be reported as “cash and cash equivalent”, the cash and cash
equivalent must be
a. Unrestricted in use for current operations
b. Available for the purchase of property, plant and
equipment
c. Set aside for the liquidation of long-term debt
d. Deposited in the bank
23. The advantage of using this method is that it provides a more transparent
view on firm value and is more verifiable since this is based in the figures
reflected in the financial statements.
a. Liquidation Value Method
b. Replacement Value Method
c. Book Value Method
d. Reproduction Value Method
24. It is defined as the value recorded in the accounting records of a
company.
a. Book Value
b. Replacement Value
c. Reproduction Value
d. Liquidation Value
25. Information required for asset-based valuation include
a. Total value of the assets
b. Financing structure
c. Classes of equity and other sources of funding
d. All of these
26. It is an estimate for cost of reproducing, creating, developing or
manufacturing a similar asset.
a. Book Value
b. Replacement Value
c. Reproduction Value
d. Liquidation Value
27. The steps in Reproduction Value Method are:
i. Conduct reproduction costs analysis on all assets.
ii. Adjust the book values to reproduction costs values
iii. Calculate the replacement value of the affected items.
iv. Apply the replacement value formula using the figures
calculated in the preceding step.
a. i, ii, iii, iv
b. i and ii only
c. i, iii, iv only
d. i, ii, iv only
28. What does reproduction value method requires?
a. Reproduction cost
b. Reproduction cost analysis
c. Reproduction cost values
d. All of the above
29. It refers to the expense involved with identically reproducing an asset or
property with the same materials and specifications as an insured property
based on current prices.
a. Reproduction cost
b. Reproduction cost analysis
c. Reproduction cost values
d. Reproduction Value
30. This method is useful when calculating the value of new or start-up
Businesses, ventures that use specialized equipment or assets, firms that
are heavily dependent on intangible assets and those with limited market
information.
a. Book Value Method
b. Replacement Value Method
c. Reproduction Value Method
d. Liquidation Value Method
PROBLEMS SOLVING
31. Solid Pine Loggers Company, a logging company, purchased a truck for
PHP 200, 000 and the truck depreciated P15, 000 per year for 4 years,
what is the net book value?
a. PHP 140, 000
b. PHP 200, 000
c. PHP 15, 000
d. PHP 240, 000
35. In this situation, it would cost the company $23,000 to purchase a similar
asset to the one they current have in order to replace it. Thus, $23,000 is
the replacement cost of the $20,000 truck because this is how much it
would cost to buy that same truck today.