The Historical Cost Principle Requires That When Assets Are Acquired

question 196

Multiple Choice

The historical cost principle requires that when assets are acquired they be recorded at

• A) appraisal value.
• B) cost.
• C) market price.
• D) book value.

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Definitions:

Projected Addition

Projected addition refers to the estimated increase or expansion in a company's assets, revenues, or capabilities, based on future plans or investments.

Debt-Equity Ratio

An indicator that specifies the proportional role of shareholders' equity and debt in asset funding.

Dividend Payout Ratio

The fraction of earnings a firm pays out to its shareholders in the form of dividends, expressed as a percentage of the company's total earnings.

Retained Earnings

Retained earnings refer to the portion of a company's profits that are kept by the company instead of being paid out as dividends to shareholders, often used for reinvestment in the business or to pay down debt.