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 on the balance sheet at their historical cost, which in this case is $500,000. The fact that the building was appraised at a higher value or that the seller paid less for it 6 years ago are not relevant for determining the initial cost of the asset.

The Superior Company Acquired a Building for $500,000