In Year 2, the Denim Company bought... In Year 2, the Denim Company bought an ac

Question

In Year 2, the Denim Company bought... In Year 2, the Denim Company bought an acre of land that cost dollar16,300. In Year 5, another company purchased a nearby acre of land for dollar29,300 and a different company purchased another nearby acre of land for dollar27,300. As a result, an appraiser estimated that the acre owned by Denim had increased in value to dollar28,300. If Denim prepares a balance sheet at the end of Year 5, the acre of land that it owns should be reported at: dollar16,300 dollar29,300. dollar27,300. The average of all of the amounts.

Explanation / Answer

Solution:

$16,300.

Fixed Assets of a company are always reported at the purchase price/ book value of the asset. The asset depreciations are then deducted from this amount as required.

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