Question

Land was acquired in 2021 for a future building site at a cost of $41,500. The assessed valuation for tax purposes is $28,200, a qualified appraiser placed its value at $49,300, and a recent firm offer for the land was for a cash payment of $44,800. The land should be reported in the financial statements at:

Answer 1

Answer:

The land should be reported in the financial statements at $41,500

Explanation:

The company will report the asset value in the financial statements as their original purchase price of $40,300. Under Historical cost principle, the price of an asset on the balance sheet is always based on the original cost when the company purchased the asset. It follows the Generally Accepted Accounting Principles (GAAP) which is widely accepted. Therefore the land is reported in the financial statements at its purchase value of $41,500