AICPA CPA-Financial Exam - Topic 3 Question 61 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 61
Topic #: 3

[All CPA-Financial Questions]

There are multiple active markets for a financial asset with different observable market prices:

There is no principal market for the financial asset. What is the fair value of the asset?

A$71

B$72

C$74

D$76

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. When there is no principal market, the price in the most advantageous market is the fair value measurement. Although transaction costs are not included in the fair value measurement, they are used to determine the most advantageous market, as follows:

Market A: Net Price = Quoted Price - Transaction Costs = $76 - 5 = $71

Market B: Net Price = Quoted Price - Transaction Costs = $74 - 2 = $72

Because the net price in Market B is higher than the net price in Market A, Market B is the most advantageous market and the quoted price in Market B ($74) is the fair value of the asset.

Choice 'a' is incorrect. This is the net price in Market A. Fair value does not include transaction costs.

Choice 'b' is incorrect. This is the net price in Market B. This net price indicates that Market B is the most advantageous market, but the net price is not the fair value because fair value does not include transaction costs.

Choice 'd' is incorrect. If Market A were the principal market for the asset, then this would be the fair value of the asset. However, because there is no principal market, the price in the most advantageous market (Market B) is the price of the asset.

by Vallie at Nov 21, 2022, 09:53 AM

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Nell

4 months ago

Totally agree with $72, it just feels right!

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Karma

4 months ago

$74 seems reasonable based on the options.

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Lazaro

4 months ago

Wait, how can there be no principal market? That seems off.

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Miesha

4 months ago

I think it's definitely $72!

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Soledad

4 months ago

Fair value is usually the average of market prices.

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Lavera

5 months ago

I think we learned that in cases like this, we should look for the most advantageous price. I’m leaning towards $74, but I’m not completely confident.

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Serita

5 months ago

I’m a bit confused about how to approach this. Do we just take the average of the prices or is there a specific rule we should follow?

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Kattie

5 months ago

This question seems similar to one we practiced where we had to choose the highest price in the absence of a principal market. I think it might be $76.

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Kristeen

5 months ago

I remember we discussed how to determine fair value when there are multiple prices, but I’m not sure which one to pick here.

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Ceola

5 months ago

This seems straightforward enough. I think the issue is likely related to the data retention settings or the table types. I'll focus on those areas and try to identify the two most likely causes.

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Jonelle

5 months ago

Ah, I see what they're getting at. C is definitely the way to go here. Blocking input is the key to ensuring the robot doesn't interfere.

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Hermila

5 months ago

I'm a bit stuck on this question. The roles in cloud computing aren't my strongest area, so I'll have to make an educated guess here. I'll review my notes and see if I can eliminate any of the options.

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Lenora

5 months ago

This looks like a pretty straightforward question about HPE OneView server profiles. I think I've got a good handle on this topic, so I'll give it my best shot.

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