Answer:
1. - $ 80,000
2. - $ 80,000
3. - $ 0 - No effect
Explanation:
1. Assets
- <em>80,000</em> ( pay loan ) - decrease
2. Liabilities
- 80,000 ( loan from <em>+</em><em> 80,000 </em> to <em>0</em> ) - decrease
3. Stockholders Equity: no change, as there was not result ( profit/loss ) nor shareholder contribution/withdrawal
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Answer:
B. historical cost.
Explanation:
In financial statements assets are reported at their cost of purchase or historical cost. This approach does not account for price fluctuations under present market conditions.
Historical cost is used to avoid inflating financial position of an organisation, as price changes in the market are largely temporary.
Valuation on the other hand considers an asset's fair market value.