Ten Years After a Company Purchases a Plot of Land

question 17

Multiple Choice

Ten years after a company purchases a plot of land, it is measured on the balance sheet at its cost from the year it was purchased instead of its current selling price. This accounting practice is justified by the:

• A) financial period assumption.
• B) going concern assumption.
• C) fiscal period assumption.
• D) original cost base.

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Definitions:

Legal Right

A benefit conferred upon a person by law, which can be protected and enforced by the legal system.

Consideration

Something of value exchanged between parties in a contract, required for the contract to be legally binding.

Contract Modification

Any change or alteration made to the terms of a contract, agreed upon by all parties involved.

Price Change

The fluctuation in the selling price of goods or services over a period of time.