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 cost principle dictates that assets should be recorded at their original cost to the buyer, rather than their current fair market value or what the seller originally paid for it. In this scenario, Superior purchased the building for $500,000, which is the cost that should be recorded on their records.

The Superior Company Acquired a Building for $500,000