After completing the reading assignments and watching the lecture, write a 3-page (minimum 750 words) response to the following question (do not
use the question in your response):
Define and explain each of the following valuation methods used in financial statements: (1) Historical cost; (2) Lower-of-cost-or-market; (3) Depreciated book value; (4) Amortized book value; (5) Present value; (6) Future cost; and (7) Actuarially estimated present value. For each of the seven methods, give an example of an asset or a liability that uses that method.
January 28, 2017
Your Institution of Affiliation
1 Historical Cost is a kind of measure utilized in the field of accountancy that evaluates an asset’s value based on its original cost when it was first purchased/acquired by the company/individual (Investopedia.com, n.d.). For example, if the company if purchased a building as its main production site in the year 2014 for $400,000, given that this company utilized historical costs in its financial statements, then the balance sheet on this asset would still reflect $400,000 despite any changes in is present value after all the years that they’ve been using it.
2 Lower-of-cost-or-market is usually utilized by companies in order to include any “deteriorations/declines” in assessing an asset`s value. This is done by recording an asset’s value depending on which has a lower cost between