Question

If a company is considering the purchase of a parcel of land that was acquired by the seller for $94,000, is offered for sale at $168,000, is assessed for tax purposes at $104,000, is recognized by the purchaser as easily being worth $158,000, and is purchased for $155,000, the land should be recorded in the purchaser's books at:
a. $155,000.
b. $104,000.
c. $158,000.
d. $156,500.
e. $168,000.

Answer 1

Answer:

a. $155,000.

Explanation:

For recording the land value in the purchaser's books we reported the value of the land at the purchase price i.e $155,000 by following up the historical cost principle that states only purchase price would be reported

The other cost is not considered because it is not relevant for recording in the purchaser books

So, the actual amount in which land is purchased would be reported i.e $155,000