In chapter 16 we learned that companies under the cost

Reference no: EM13571127

The historical cost principle states that assets should be recorded at the cost of the consideration given at the time of acquisition, and the conservatism principle states that companies cannot report assets at amounts greater than their historical cost.

For instance, if a company purchases land for $100,000 in 1950, it must be reported at $100,000 in their 2013 balance sheet even if the fair market value of the land is actually $10,000,000.

In chapter 16, we learned that companies, under the cost method, are required to adjust the values of their securities portfolios so that they are reported at fair market value, which often results in reporting investments at amounts *higher* than their historical cost.

Isn't this a violation of the historical cost and conservatism principles, and why are investments in securities treated differently than an asset like land?

Reference no: EM13571127

Questions Cloud

South central airlines operates a commuter flight between : south central airlines operates a commuter flight between atlanta and charlotte. the plane holds 31 passengers and the

Acme inc will undergo a 9 stock dividend its current price : acme inc. will undergo a 9 stock dividend. its current price is 92.05 per share. everything else being equal what will

Which pair of accounts follows the rules of debit and : which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same

How would you protect corporate executives of fraudulent : please answer the following questions listed below. as you answer each question you must provide support or evidence

In chapter 16 we learned that companies under the cost : the historical cost principle states that assets should be recorded at the cost of the consideration given at the time

On march 12 2011 it sold one of its old trucks for 6000 : the rite-way plumbing co. began business march 1 2008 in sarasota. its business address is 124 division lane sarasota

Whats the future value of a 7 5-year ordinary annuity that : nbspfuture valuenbspannuity versus annuity duenbspwhats the future value of a 7 5-year ordinary annuity that pays 300

This makes no sense at all said bill sharp president of : this makes no sense at all said bill sharp president of essex company. we sold the same number of units this year as we

List the various costs pink jeep would incur to offer each : pink jeep tours offer off-road tours to individuals and groups visiting the southwestern u.s. hopspots of sedona

User Account

All Pages