Question

If a company is considering the purchase of a parcel of land that was acquired by the seller for $99,000 is offered for sale at $178,000, is assessed for tax purposes at $109,000, is recognized by the purchaser as easily being worth $168,000, and is purchased for $165,000, the land should be recorded in the purchaser's books at:

Answer 1

It should be recorded at the price of $109,000.

Answer 2

Answer:

The parcel of land should be recorded in the purchaser's books at $165,000.

Explanation:

According to the general accepted accounting principles (GAAP), when an asset is initially purchased, it should be recorded at cost plus any incurred expenses which are necessary to bring the asset to the its normal operation/usage.

So, with the information given in the question, all the other prices are irrelevant in term of deciding what value the parcel of land is recorded in the purchaser's book except for the purchased price.

Thus, the parcel of land should be recorded at the purchased price which is $165,000.