Martin Corporation purchased land in 2007 for $290,000. In 2015, it purchased a nearly identical parcel of land for $460,000. In its 2015 balance sheet, Martin valued these two parcels of land at a combined value of $920,000. By reporting the land in this manner, Martin Corp. has violated the

Question

Quizplus · Accepted Answer

The historical cost principle requires that assets be recorded at their original cost. In this case, Martin Corporation is valuing its two parcels of land at their combined current market value of $920,000, which violates the historical cost principle. The fact that the two parcels are nearly identical does not justify revaluing them at market value.

Martin Corporation Purchased Land in 2007 for $290,000