Chapter 10, Problem 14Q

To determine

(a)

Whether holding stocks, corporate bonds, and commodities in the book of banks is a good idea or not.

Introduction:

Asset is the monetary value that is owned by a firm or an individual. Assets are listed inthe balance sheet and include tangible items such as inventories, equipment, and real estate as well as intangible items such as property rights or goodwill.

To determine

(b)

The method to be used either historical cost accounting or market to market accounting at the time of a crash in the housing sector.

Introduction:

When assets are recorded in balance sheet based on the price at which the assets were purchase is known as the historical cost accounting. When assets are recorded in balance sheet based on the current market price is known as the market-to-market accounting.

To determine

(c)

The method to be used either historical cost accounting or market to market accounting at the time when price of a commodity suddenly rises.

Introduction:

Market to market accounting is used when there is increase in the price of a commodity. Current price depicts the right picture of the market and use of market to market accounting helps to understand the fluctuations in the market.

To determine

(d)

The explanation about the Trade offs between the historical cost accounting and market to market accounting