Eight years ago, Bravo Company purchased land for $170, 000. The current fair market value of the land is $421,000. The rate of

Question

3 years ago

8

Eight years ago, Bravo Company purchased land for $170, 000. The current fair market value of the land is $421,000. The rate of

general inflation experienced during the 8-year period has averaged 10% per year. At the time the land was purchased, Bravo intended to hold it for 20 years. At what amount should the land be carried on Bravo's books today

Business

1 answer:

victus00 [196] · Answer 1 · 2022-05-05T17:34:19+03:00

Answer: $170,000

Explanation:

According to the historical cost concept, the original cost value of a asset (i.e. land) should be recorded in the books. The original cost refers to the cost of a asset at the time of purchasing. As per the principle of historical cost, assets are always recorded as a original cost or historical cost or acquisition cost.

But when a person sold the asset then he will consider the fair market value.