Discussion topic | Financial Accounting | Monroe College

Discussion Topic

The Cost Principle, is an important measurement principle which is used in accounting. Describe the cost principle and discuss what happens if an asset like land has an increase in the fair value. How would the company report the land?

Describe the fair value principle and for what types of assets is the fair value principle used.

Which measurement principle (cost or fair value) do companies use to record most assets?

Example question: Eve Myles Travel Agency purchased land for $90,000 cash on December 1, 2012. On December 31, 2012, the land’s value had increased to $95,000. What amount should be reported for land on Eve’s balance sheet on December 31, 2012?

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