How did sprouse and moonitz describe continuity 2

1. How did Sprouse and Moonitz describe continuity?
2. Given the presumption of continuity, if you are planning to buy a business,
would the historical cost of the company's assets be relevant to your
decision to invest? Explain. If your answer is no, what asset values would be
relevant to your decision to invest?
3. If a company is bankrupt and plans to liquidate its assets, can continuity
still be presumed? Explain. If your answer is no, how do you think the lack
of continuity should affect the measurement of assets reported in a
company's balance sheet?

1. Your company is using the building as a plant that is producing automobiles.
2. Your company is not using the building but plans to sell it. Explain how the
building meets the definition of an asset.
3. Your company is not using the building but plans to remodel it so that it can
be used as a plant to produce automobiles.
Case 2-6 Measurement and Reporting
Gabel Company spent money to train its employees so that they can be productive
workers. Such expenditures are often referred to as investments in human
capital.
Required:
1. Do you think that Gabel Company's trained employees meet the definition of
an asset? Explain. In your answer, discuss the characteristics of an asset
and whether you think they meet each of those characteristics.
2. Most accountants would say that human capital is valuable but that it is
difficult, or even impossible, to measure the value of human capital. Given
that you cannot determine an amount to place a value on the Gabel
Company's employees, but you think that they are assets, what would SFAC
No. 5 tell you to do? Should you report them as an asset in the company's
balance sheet? Explain.
3. If a value can be estimated for Gabel Company's trained employees,
1. Would that value be more relevant or more reliable to a prospective
investor? Explain.
2. Would the company's assets reported in its balance sheet be more
representationally faithful if they include the human capital than they
would be without reporting an amount for the employees? Explain.
1. If both companies' bonds are due in ten years, what factor(s) might make
the bond market value the Company A bond at an amount greater than the
Company B bond? If so, would Company A have a higher credit rating than
Company B? If so, would the market rate of the Company A bond be higher
than the market rate of the Company B bond? Explain your answers to this
question, referring to the guidance found in SFAC No. 7 .