Question

In 1998, Parker Corporation purchased land for $130,000. In 2010, Parker Company had the land appraised, and its value was estimated to be $190,000. Also during 2010, another company offered Parker $145,000 for the parcel of land. When the balance sheet is prepared at the end of 2010, at what dollar amount should the land be reported?

Answer 1

Answer:

The land should be reported at $130,000

Explanation:

In this question, we have to apply one of the Generally Accepted Accounting Principle (GAAP), i.e. Historical cost principle.

Historical Cost Principle: According to this principle, the value of fixed assets should be recorded at the purchase price or book value.  

So, in the given case, the land should be reported at $130,000 irrespective of whatever amount is given in the question