An asset purchased according to a deferred payment plan should be recorded based on the present value of the total cash paid.

Question

Quizplus · Accepted Answer

This is because the present value of the total cash paid represents the actual cost of the asset, taking into account the time value of money and any interest charges associated with the deferred payment plan. It is necessary to record the asset at its actual cost in order to accurately reflect its value on the balance sheet.

An Asset Purchased According to a Deferred Payment Plan Should