Which of the following is allowed under generally accepted accounting principles? A. A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the land account to $60,000B. An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the companys balance sheetC. A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years. D. The equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.

Question

Business

Savannah Tyler

9 May, 20:19

Which of the following is allowed under generally accepted accounting principles? A. A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the land account to $60,000B. An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the companys balance sheetC. A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years. D. The equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.

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Hayley Coleman · Answer 1

D. The equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.

Explanation:

Whenever an asset which is long term in nature is acquired it is shown at historical cost less accumulated depreciation.

Here, we are provided that,

Cost of equipment was $75,000

Accumulated depreciation = $20,000

Thus, the equipment will be show at $75,000 - $20,000 = $55,000.

This is as per the principles of GAAP as stated for fixed assets reporting.

All fixed assets are recorded at historical cost, thus, statement a is not correct.

An asset which is majorly used for personal purposes is not included in company's books at entire cost.

Material things are considered as the material concept states that if an asset can be used for more than 1 financial year it is fixed asset and shall not be charged as revenue expenditure.

Therefore, the correct statement is

D. The equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.