Under the historical cost principle, equipment is initially recorded at:
Correct answer: B. Its original purchase cost
- A. Its estimated resale price
- B. Its original purchase cost
- C. Its current replacement cost
- D. Its expected future selling price
Explanation
Historical cost records an asset at the amount paid to acquire it, including directly attributable acquisition costs where appropriate. Later market or replacement values do not normally determine its initial recorded amount.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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