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Under the cost principle, at what amount are assets recorded in the journal?
ATheir estimated resale value
BThe amount still owed on them
CTheir value after one year of use
DWhat the business paid to acquire them
Answer & Solution
Correct answer: D. What the business paid to acquire them
1. The cost principle requires assets to be recorded at what they cost the business.
2. This is the amount paid to acquire them, not a later or estimated value.
3. Resale value (A) and depreciated value (C) are not the recording basis.
4. The amount owed (D) relates to a liability, not the asset's recorded cost.
5. Therefore assets are recorded at acquisition cost.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.5.1 "Assets", p.34_
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