Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Onslow Company purchased a used machine as an investment. Under U.S. GAAP, how should Onslow initially record the cost of the machine on its balance sheet?

At the lower of cost or market value

At the machine's estimated fair market value only

At the purchase price plus any costs necessary to get the machine ready for use

At the purchase price minus any installation costs

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Verified step by step guidance

Understand the concept of initial asset recognition under U.S. GAAP: When a company acquires an asset, it must record the asset at its historical cost, which includes the purchase price and any costs necessary to prepare the asset for its intended use.

Identify the components of the historical cost: These typically include the purchase price, transportation costs, installation costs, and any other costs directly attributable to bringing the asset to its operational condition.

Exclude costs that are not directly related to preparing the asset for use: For example, maintenance costs or costs incurred after the asset is operational are not included in the initial recognition.

Record the asset on the balance sheet: The total of the purchase price and all necessary preparation costs is recorded as the asset's value under the 'Property, Plant, and Equipment' section of the balance sheet.

Ensure compliance with U.S. GAAP: Verify that the recorded value aligns with the principle of historical cost and does not use market value or any other valuation method unless specified by accounting standards.