Question

A yacht offered for sale is currently assessed at $350K but asked for $450K. The purchaser of the yacht believes that the yacht is worth $375K, but ultimately purchases the yacht for $400K.

The purchaser records the yacht at:

a. $45K

b. $450K

c. $400K

d. $350K

e. $375K

Answer 1

c. $400K

Step-by-step explanation:

Given that

Offered price for sale = $350K

Asked price = $450K

Worth of the yacht determined by the purchaser = $375K

The Purchase value of yacht = $400K

By considering the historical cost principle, the yacht should be recorded at the purchase price or acquired price or original price i.e $400K in the purchase records so that the reliability of the books could be maintained