Under the cost principle, at what amount should land be recorded after a seller's counteroffer of $115,000 is accepted?

Prepare for the Cengage Accounting Exam 1. Use flashcards and tackle multiple choice questions with hints and detailed explanations. Be exam-ready!

Multiple Choice

Under the cost principle, at what amount should land be recorded after a seller's counteroffer of $115,000 is accepted?

Explanation:
Under the cost principle, assets are recorded at their historical cost—the amount paid to acquire them and bring them to use. When the seller’s counteroffer of 115,000 is accepted, that negotiated price becomes the land’s cost (plus any directly attributable closing costs if stated). Since only the accepted price is given, the land should be recorded at 115,000. The other amounts would only be relevant if they reflected the actual cash paid or added costs, but they do not represent the negotiated purchase price.

Under the cost principle, assets are recorded at their historical cost—the amount paid to acquire them and bring them to use. When the seller’s counteroffer of 115,000 is accepted, that negotiated price becomes the land’s cost (plus any directly attributable closing costs if stated). Since only the accepted price is given, the land should be recorded at 115,000. The other amounts would only be relevant if they reflected the actual cash paid or added costs, but they do not represent the negotiated purchase price.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy