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Practice Question 42
The historical cost principle requires that if a company buys a building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014, the company will have to report the building at $2,000,000 in the balance sheet for 2014.
| True |
| False |
| Click if you would like to Show Work for this question: | Open Show Work |
Expert Answer
| Answer – True. | |||||||||
| Historical Costing Method – According to the cost concept, an asset is recorded in the books of accounts at the price paid to acquire it and the cost is the basis for all subsequent accounting of asset. Asset is recorded at the cost at the time of purchase but is systematically reduced in value by charging depreciation. | |||||||||
| Therefore, the compnay will report the building at $2,000,000 in the balance sheet for 2014. | |||||||||
