When a new company was formed, one partner contributed some used equipment he owned. The equipment was appraised at $44,000 and $50,000 by two different dealers. The accountant entered the equipment at $44,000 in the financial records of the partnership. This is an example of
A)the materiality constraint.
B)the matching principle.
C)the conservatism constraint.
D)industry practice constraint.

Question

Quizplus · Accepted Answer

This is an example of the conservatism constraint as the accountant chose the lower value of the equipment appraisal to avoid overstating assets in financial records.

When a New Company Was Formed, One Partner Contributed Some