Question

In Year 2, the Denim Company bought an acre of land that cost $15,600. In Year 5, another company purchased a nearby acre of land for $28,600 and a different company purchased another nearby acre of land for $26,600. As a result, an appraiser estimated that the acre owned by Denim had increased in value to $27,600. If Denim prepares a balance sheet at the end of Year 5, the acre of land that it owns should be reported at:

Answer 1

Answer:

The acre of land that it owns should be reported at $15,600

Explanation:

At the time of recording of the fixed assets, the fixed assets should be recorded at purchase cost or historical price

Since in the question, the land was purchased at $15,600 and various other land is also purchased in year 5. Moreover, the value of the land would also be increased to $27,600

But at the time of recording, the balance sheet would show at the purchase price i.e $15,600