Question

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it? Separate-entity assumption. Revenue principle. Stable monetary unit assumption. Historical cost principle. Which of the following transactions will not decrease the net profit margin ration?

Answer 1

Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

• Historical cost principle: states that assets, liabilities and equity investments must be recorded at their original purchase price.

Which of the following transactions will not decrease the net profit margin ration?

• using cash to pay for previously accrued salaries.

All the other transaction increase expenses which results in a lower net profit margin ratio.