Question

On February 3, Easy Repair Service extended an offer of $116,000 for land that had been priced for sale at $132,000. On February 28, Easy Repair Service accepted the seller's counteroffer of $126,000. On October 23, the land was assessed at a value of $189,000 for property tax purposes. On January 15 of the next year, Easy Repair Service was offered $202,000 for the land by a national retail chain.

At what value should the land be recorded in Easy Repair Service's records?

Answer 1

Requirement:- At what value should the land be recorded in Easy Repair Service's records?

Solution:- As per accounting norms and regulations, When we purchased a land, all the expenditures that are incurred to acquire land and then make it ready for use will considered as land cost. In this case there is no improvements on land. So we should record the purchase price i.e. $126,000 will be considered and this will be the value of land.

$126,000 i.e. the seller counter offer. This is the price that was paid by Easy repair service to acquire the land.

Thank you!!