Homevestors purchased land for $400,000 in 2007. In 2019, an independent apprais

Question

Homevestors purchased land for $400,000 in 2007. In 2019, an independent appraiser assessed the value of the land at 900,000. At what amount should the land be recorded on the company’s 2019 financial statements?

a.

whichever amount the company considers to be the best indicator of the land's true value

b.

at $500,000, the difference between the land’s cost and assessed value

c.

at its cost of $400,000

d.at its $900,00 appraised value

a.

whichever amount the company considers to be the best indicator of the land's true value

b.

at $500,000, the difference between the land’s cost and assessed value

c.

at its cost of $400,000

d.at its $900,00 appraised value

Explanation / Answer

As per historical cost concept purchase land cost should be reported on purchase cost of land.

so answer is c) at its cost of $400,000

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