Revaluation of Assets - SS2 Accounting Past Questions and Answers - page 1
What is asset revaluation?
The process of adjusting the carrying value of an asset to its current market value
The process of purchasing a new asset to replace an old one
The process of depreciating an asset over time
The process of selling an asset at a profit
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What is the purpose of asset revaluation?
To overstate the value of an asset on a company's balance sheet
To understate the value of an asset on a company's balance sheet
To accurately represent the value of an asset on a company's balance sheet
To avoid paying taxes on the value of an asset
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How is the fair market value of an asset determined for revaluation purposes?
By analyzing the asset's historical cost
By estimating the value of the asset based on industry averages
By engaging a professional valuer to determine the asset's current market value
By depreciating the asset over time
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What effect does asset revaluation have on a company's financial statements?
It always results in a decrease in the company's equity
It always results in an increase in the company's equity
It can result in either an increase or decrease in the company's equity
It has no effect on the company's equity
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Why might a company choose to revalue an asset?
To make the asset appear more valuable than it actually is
To avoid paying taxes on the asset
To accurately reflect changes in the value of the asset over time
To reduce the company's overall asset value
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Define asset revaluation and explain why it is important for a company's financial statements to accurately reflect the value of its assets.
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What are some potential drawbacks or risks associated with asset revaluation?
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