Sunland Company purchased land in 2010 for $303000. In 2018, it purchased a nearly identical parcel of land for $475000. In its 2018 balance sheet, Martin valued these two parcels of land at a combined value of $948000. By reporting the land in this manner, Sunland Co. has violated the:

Question

Business

Memphis Escobar

29 July, 06:48

Sunland Company purchased land in 2010 for $303000. In 2018, it purchased a nearly identical parcel of land for $475000. In its 2018 balance sheet, Martin valued these two parcels of land at a combined value of $948000. By reporting the land in this manner, Sunland Co. has violated the:

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Answers (1)

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Gustavo Herrera · Answer 1

Historical cost principle

Explanation:

According to the historical cost principle, the value of fixed assets should be recorded at the book value or the purchase price.

Since in the question, the martin valued the land of $948,000 which is a total of the purchased amount and the parcel of land.

The land should be recorded for $303,000, not for $948,000

So, it violates the historical cost principle