Assets: Assets refer to those resources that an organization owns, against which the organization derives a value in the future. Cost of Asset: Cost of an asset refers to the total amount of expenditure that is incurred to acquire an asset and make it ready for use. Historical cost principle: The historical cost concept of accounting (cost principle) states that each and every item should be recorded at its cost (purchased value), not at its fair value while preparing any financial statement because there is no availability of document regarding fair value as evidence for recording, till that item is not sold in the market. Therefore, the fair value of items is not used as the basis for all accounting measurement and reporting. To Identify: The application of the historical cost principle for determination of acquisition cost of plant assets.

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Chapter 10, Problem 10.1E

(a)

To determine

Assets: Assets refer to those resources that an organization owns, against which the organization derives a value in the future.

Cost of Asset: Cost of an asset refers to the total amount of expenditure that is incurred to acquire an asset and make it ready for use.

Historical cost principle: The historical cost concept of accounting (cost principle) states that each and every item should be recorded at its cost (purchased value), not at its fair value while preparing any financial statement because there is no availability of document regarding fair value as evidence for recording, till that item is not sold in the market. Therefore, the fair value of items is not used as the basis for all accounting measurement and reporting.

To Identify: The application of the historical cost principle for determination of acquisition cost of plant assets.

(b)

To determine

To Identify: List of foregoing transactions, and indicate the relevant accounts for the transactions.

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