The Superior Company acquired a building for $500,000.The building was appraised at a value of $575,000.The seller had paid $300,000 for the building 6 years ago.Which accounting principle would require Superior to record the building on its records at $500,000?

Question

Quizplus · Accepted Answer

The measurement (cost) principle requires that assets be recorded at their original cost, even if their market value has increased over time. In this case, Superior acquired the building for $500,000, which is the original cost of the asset, so it should be recorded at that value on the company's records. The fact that the seller paid $300,000 for the building 6 years ago or that it was appraised at $575,000 does not impact the initial cost of the asset for Superior.

The Superior Company Acquired a Building for $500,000