Question

The Tech Hotel purchased a computer for $3,000 that the salesperson said was actually worth $3,500; it is projected that the computer will have a market value of $2,500 in one year. The cost principle dictates that the computer purchase be recorded at the date of purchase for:

Answer 1

Answer:

$3,000

Explanation:

The historical cost principles states that asset purchased are to be recorded at their initial cost of historical cost value.

According to International Accounting Standards (IAS) 16, property plants and equipment, the cost of an asset includes all of the cost necessary to bring and make it ready for the intended use.

These costs include purchase cost, fees and commission associated with the purchase transaction.  

Going by this principle, the computer should be recorded at the purchase cost of $3,000