Eton Corporation purchased land in 1998 for $190,000.In 2014,it purchased a nearly identical parcel of land for $430,000.In its 2014 balance sheet,Eton valued these two parcels of land at a combined value of $860,000.Reporting the land in this manner violated the:
A)Cost principle.
B)Principle of the business entity.
C)Objectivity principle.
D)Going-concern assumption.

Question

Quizplus · Accepted Answer

The cost principle states that assets should be recorded at their historical cost, which is the amount paid to acquire them. Eton Corporation violating this principle by valuing the two parcels of land at a combined value of $860,000, which is more than their combined historical cost of $620,000.

Eton Corporation Purchased Land in 1998 for $190,000