Question

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

A. Monetary unit assumption.
B. Going-concern assumption.
C. Cost principle.
D. Business entity assumption.

Answer 1

C. Cost principle.

Step-by-step explanation:

Based on the information provided within the question it can be said that the accounting principle that would require this would be the Cost Principle. This is a basic underlying guideline found in accounting which states that the asset in question must be recorded at the exact cash amount that was paid at the time that the asset was acquired by the individual. Which in this scenario would be $500,000.