Question

A local citizen donated land with a fair market value of $500,000 to the county government. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county would capitalize the new public park at
A) $500,000.
B) $550,000.
C) $700,000.
D) $650,000.
E) $0.

Answer 1

Answer: The correct answer is "D) $650,000.".

Explanation: The county would capitalize the new public park at:

$ 650,000.

The new public park is capitalized = the market value at the date of incorporation of the land + costs incurred to transform it into a public park.

$500,000 + $150,000 = $650,000.