41. Replacement cost is one way to measure the value of an item. Which of the following best describes replacement cost?
A. What you paid for the item.
B. What it would cost to replace the item with an identical item in the same condition.
C. What it would cost to replace the item with an identical new item.
D. What the item could be sold for now.
42. If you wanted to sell your MP3 player to buy a new one with more memory, which of the following methods of valuing an item would be the most useful?
A. Cost
B. Replacement cost
C. Replacement cost new
D. Net realizable value
43. If you wanted to insure your brand new Ferrari sports car to ensure that if anything happened to it you could replace it, which of the following methods of valuing an item would be the most useful?
A. Cost
B. Replacement cost
C. Replacement cost new
D. Net realizable value
44. You have a collection of 200 international stamps that you have collected over the years. Most of them cost you nothing, as you just took them off letters or postcards that you or friends and family had received. If you add up the face value (the amount printed on the stamp), your collection totals $125.37. You recently saw a story in a local newspaper that someone else sold a similar collection of 400 stamps for $500. Which of the following statements is most likely true?
A. The value of the collection is $250.00.
B. The selling price of the collection is $125.37.
C. The replacement cost of the collection is $250.00.
D. The replacement cost - new of the stamps is $125.37.
45. Your brother borrowed your 2010 Toyota Corolla and had an accident. He is okay, but the car is write-off. You paid $5,000 for it a year ago, and your brother has offered to give you $3,000, the cost he estimates of another 2010 Toyota Corolla. A new Toyota Corolla costs $22,500. Which of the following statements is true?
A. The replacement cost of the car is $3,000.
B. The replacement cost of the car is $5,000.
C. The replacement cost-new of the car is $5,000.
D. The replacement cost of the car is $22,500.
46. You have been approached to invest in a real estate venture. A small group is going to buy a piece of land and construct single-family homes on it and then sell them. The group has done similar deals in the past, but one of the participants has left the group and they are now looking for new investors.
Required:
Explain how accounting information would help you decide whether or not to invest in the proposed venture. What non-accounting information would you also want?