Green Enterprises buys a warehouse for $600,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $620,000 for the warehouse. The seller had originally purchased the building for$480,000. Green has a similar warehouse on the West Coast that has a book value of $612,000. Under the historical cost principle, Green should record the building for

Question

Lea Huff

Business

18 June, 08:39

Green Enterprises buys a warehouse for $600,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $620,000 for the warehouse. The seller had originally purchased the building for$480,000. Green has a similar warehouse on the West Coast that has a book value of $612,000. Under the historical cost principle, Green should record the building for

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Answers (1)

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Darion Bauer · Answer 1

The warehouse should be recorded at $600000

Explanation:

The historical cost pricniple or convention is a really important convention in accounting that states and requires that assets should be recorded in the books at the orignal price thata was paid for them at the time of purchase. Thus, basing our decision on the historical cost principle, as Green Enterprises purchases the warehouse at a cost of $600000, it should be recorded at this cosy only.