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Question 4 An asset is initially recorded at cost. Subsequently, it could be recorded using cost revaluation model. An accoun

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Answer #1

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As per the HOMEWORKLIB POLICY, only the first question should be answered completely. Kindly take note of it.

Answer:4(i)

The fair value of an asset is determined on the basis of the actual value of the asset in the open market. It is the value of an asset at which the seller is ready to sell and the buyer is ready to buy an asset in the free trade market.

Answer:4(ii)

Yes, the balance sheet prepared using the cost model be different from the one prepared using the revaluation model because the value of asset recorded each different method is different. In the balance sheet based on the cost model, the carrying value of an asset is equal to cost minus accumulated depreciation – impairment loss (if any). On the other hand, in the balance sheet based on the revaluation model, the carrying value of an asset is equal to fair market value minus subsequent depreciation – impairment loss (if any).

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