Question

Savings Mart is a national retail chain. To entice the company to open a mega store in its jurisdiction, the city of Populationville donated a 20-acre tract of land to be used for construction. The land was originally purchased by the city for $250,000 three years ago. The appraisal value at the time of the donation was $300,000. For what amount should Savings Mart record the donated land

Answer 1

Answer:

$300,000

Explanation:

As per the Internal service revenue (IRS) and Generally accepted accounting principles (GAAP), when the entity who is profit making received any fixed asset as a donation than the same assets should be recorded at the fair value amount

Here the purchase price is $250,000 and the appraisal value i.e. fair value is $300,000

So the amount of donating the land should be recorded at $300,000