Question

Select-a-Shot installed a machine to print codes on golf balls. The purchase price of the machine, including freight and installation costs, totaled $222,689. Which of the following accounting principles required the asset to be recorded at that price?

a. Matching
b. Full disclosure
C. EXCHANGE PRICE (COST)
d. Gain/Loss recognition

Answer 1

The accounting principle in question is the Exchange Price (Cost) principle, which mandates recording an asset at its acquisition cost, including all related expenses. Option C

Step-by-step explanation:

The accounting principle requiring the asset to be recorded at the purchase price of $222,689 is the Exchange Price (Cost) principle. This principle, also referred to as the historical cost principle, dictates that the asset should be recorded on the company's books at the cost paid to acquire it, inclusive of all purchase-related expenses such as freight and installation.

It reflects an objective measure of what has been given up to acquire the asset, as opposed to subjective measures like current market value or future benefits. Option C