Calculate the value of this van under the following bases: a) Historical cost

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 9Q: Explain the difference between prime costs and conversion costs.
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Calculate the value of this van under the following bases:
a) Historical cost
Transcribed Image Text:Calculate the value of this van under the following bases: a) Historical cost
Expert Solution
Step 1

A historical cost is the original cost of an asset that is the value of the asset when it is acquired by the company. As per this, the asset is recorded on balance sheet on its historical cost only.

US GAAP states that all the assets should be reported only on historical cost on balance sheet. The value of asset remains constant over the period when company follows the historical cost concept and it also helps the company to follow the consistency concept of the accounting.

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