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Using the cost principle:

Multiple Choice
A.all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset.
B.only the actual purchase price of the asset is recorded as the cost of the asset.
C.costs of preparing an asset for use should never be recorded as part of the cost of the asset.
D.only reasonable and necessary costs of acquiling an asset should be recorded as a cost of the asset.

1 Answer

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Final answer:

The cost principle states that all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset.

Step-by-step explanation:

The cost principle states that all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset.


In other words, when recording the cost of an asset, it is important to consider not only the actual purchase price but also any costs incurred in getting the asset ready for use. For example, if a company purchases a computer, the cost of the computer itself as well as any additional costs such as shipping, installation, and training should be included in the recorded cost of the asset.


Therefore, the correct answer is option A: all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset.

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