Which of the following statements about the concepts underlying the balance sheet is correct?
A)A company bought land for $5 million dollars 10 years ago.The land is now worth $15 million.The company should increase the book value of this asset on its balance sheet to reflect its current value.
B)All events affecting the current value of a company are reported on the balance sheet.
C)According to the cost principle,assets are valued at their replacement cost.
D)If an asset's value increases,the increase in value is generally not recorded under GAAP.

Question

Quizplus · Accepted Answer

Following the cost principle,assets and liabilities are first recorded at cost,which is their cash-equivalent value on the date of the transaction.Later,if an asset's value increases,the increase is generally not recorded under GAAP (unless it is a particular type of financial investment).

Which of the Following Statements About the Concepts Underlying the Balance