Question

Loom Enterprises buys a warehouse for $520,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $640,000 for the warehouse. The seller had originally purchased the building for $480,000. Loom has a similar warehouse on the West Coast that has a book value of $531,000. Under the historical cost principle, Loom should record the building for ________.

Answer 1

Answer:

$520,000

Explanation:

The cost principal is a basic underlying guidelines in accounting. Companies record assets at their cost, at the time of the purchase and over the time asset is held.

The historical cost principle provides a point of reference for all financial statement users and appropiate market values may be used in financial analysis when deemed necessary.

All transactions are recorded at their original cost, the purchased price. In this case, is $520,000.