Question

Cost ConceptOn February 3, Clairemont Repair Service extended an offer of $360,000 for land that had been priced for sale at $400,000. On February 28, Clairemont Repair Service accepted the seller’s counteroffer of $380,000. On October 23, the land was assessed at a value of $390,000 for property tax purposes. On January 15 of the next year, Clairemont Repair Service was offered $450,000 for the land by a national retail chain.At what value should the land be recorded in Clairemont Repair Service’s records?

Answer 1

Answer:

The land should be recorded in Clairemont Repair Service’s records at $380,000

Explanation:

According to the historical cost principle, the recording of the fixed assets should be recorded at the purchase price or cost price which is to be shown in the assets side under the balance sheet.

So, according to the question, on February 28, the repair service accepted the seller's counteroffer which means that the land was purchased on February 28 for $380,0000. So, by $380,000 amount, the land would be recorded.

Other costs which are mentioned in the question is ignored.