Question

True or False: The historical cost concept requires that inventory be shown on the balance sheet at its cost (in the paid) regardless of its current value.

Answer 1

The historical cost concept requires that inventory be shown on the balance sheet at its cost regardless of its current value.

Step-by-step explanation:

The statement is true. The historical cost concept in accounting requires that inventory be shown on the balance sheet at its cost, regardless of its current value. This means that the value of inventory is recorded at the price paid to acquire it, and this value remains constant until the inventory is sold or disposed of. For example, if a company purchases inventory for $10,000 and its market value increases to $12,000, the inventory will still be reported at $10,000 on the balance sheet.