An Oklahoma City business paid $15,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $20,000. When the balance sheet was prepared, the value of the equipment was $22,000. What is the relevant measure of the value of the equipment?

Question

Quizplus · Accepted Answer

The relevant measure of the value of the equipment is the historical cost, which is the amount paid for the equipment, $15,000. This is the value recorded on the balance sheet according to the cost principle in accounting.

An Oklahoma City Business Paid $15,000 Cash for Equipment Used