Question

Cost Principle On June 25, AAA Repair Service extended an offer of $102,000 for land that had been priced for sale at $117,000. On July 9, AAA Repair Service accepted the seller's counteroffer of $111,000. On October 1, the land was assessed at a value of $167,000 for property tax purposes. On December 22, AAA Repair Service was offered $178,000 for the land by a national retail chain. At what value should the land be recorded in AAA Repair Service's records?

Answer 1

Answer

As per Cost principle of accounting, Asset is recorded at cost price paid for acquiring the assets.

In the given situation, AAA REPAIR Services accepted the selelr 's counter offer of $111,000.On July 9 AAA Repair services paid $111,000 for cost of land, so land is to be recorded at $111,000 and no matter what value land was appraised at it is recorded at cost at what purchased and not fair value.

Value of land recorded in AAA Repair service's records=$111,000