Question

The Blue Spruce Corp. has five plants nationwide that cost $350 million. The current fair value of the plants is $580 million. The plants will be reported at assets as:_________.

a) $930 million
b) $230 million
c) $350 million
d) $580 million

Answer 1

The Blue Spruce Corp. should report its plants at the historical cost of $350 million on the balance sheet. Current fair value is not used in this instance for financial reporting.

Step-by-step explanation:

The Blue Spruce Corp. has five plants nationwide that cost $350 million. The current fair value of the plants is $580 million. According to accounting principles, when a company reports its assets on the balance sheet, it should do so at their historical cost, not at the fair value. Therefore, the correct answer would be: c) $350 million. The value of the plants is based on the initial cost at the time of purchase and stays as such on the balance sheet unless depreciation or impairment must be accounted for.

Answer 2

C

Step-by-step explanation:

Equipment are reported at historical values. the historical value in this case is the price at which the plants were acquired. This is $350 million.

Fair value is the price at which the plant would be sold at the market today.

The fair value would be recorded by the acquiring firm in the case of the acquisition of The Blue Spruce Corp. or in a case were the plants are sold