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Case 1: Mr Pierre acquired his business for P10,000,000. The fair market value of the business

is P11,000,000. Will it be more useful if accounting records were adjusted corresponding to the

fair market value amount of the business? Justify your answer.


Case 2: The owner of the business is questioning why the gasoline and oil consumed by the

family in going to Cagayan by his family which was paid from cash of the business charged to his

personal drawing. He is claiming that since he is the owner of the business, he has the discretion

to the use of business cash. How would you explain your accounting for such payment?​

Sagot :

Marianne3142go

Answer:

Case 1. No acquisition of business should not be recorded at fair market value but at historical cost. Otherwise, there would be a recording of goodwill on business acquisition which is not permitted within in the current generally ac cepted accounting principles.

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