Q2RQ - Horngren'S Financial And Managerial Accounting

Question

Plant assets are recorded at historical cost. What does the historical cost of a plant asset include?

Step-by-Step Solution

Answer

Yes, Plant assets are recorded at historical cost.

Historical costs include the entire amount paid to acquire the assets and make them ready for use.

Step 1: Meaning of Cost Principle

According to Cost Principle, an asset should be recorded at its actual cost, or historical cost, and plant assets are the tangible assets of the business having a long life.

Step 2: Historical cost includes

The historical cost of the Plant Assets includes the actual price paid while purchasing it. It includes the purchase price, and commission paid, and Installation charges, etc.