A company has a factory building that originally cost the company $250,000. The current fair value of the factory building is $3 million. The president would like to report the difference as a gain. The write-up would represent a violation of which accounting assumption or principle?
A) Revenue recognition.
B) Going concern.
C) Historical cost.
D) Monetary unit.

Question

Quizplus · Accepted Answer

The write-up would violate the historical cost principle, which requires that assets be recorded at their original cost and not their current market value. The president's desire to report the difference as a gain based on the current fair value would not be in accordance with this principle.

A Company Has a Factory Building That Originally Cost the Company