The Historical Cost Principle Requires That When Assets Are Acquired

question 170

Multiple Choice

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

• A) market value.
• B) the amount paid for them.
• C) selling price.
• D) list price.

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Definitions:

Account

A record of increases and decreases in specific asset, liability, or owner’s equity items.

Freight

Costs associated with the transportation of goods, often recognized separately on financial documents for accounting purposes.

Discount Period

The time frame within which a payment can be made at a discounted rate from the total outstanding amount, incentivizing early payments.

Inventory

The goods or materials a business holds for the purpose of resale or production.