Question

Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $86,722. The Focus Company initially offered to buy the land for $111,289. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $103,641. Under the cost principle, at what amount should the land be recorded in the accounting records of Focus Company

Answer 1

Answer: $212,000

Explanation:

Under the cost principle, the amount that the land should be recorded in the accounting records of Focus Company would be $212,000.

It should be noted that under the cost principle, any property that can be considered to be an asset would have to measured at its cost.

Since the companies settled on a purchase price of $212,000, that'll be the amount that will be recorded.