Question

Eight years ago, Bravo Company purchased land for $170, 000. The current fair market value of the land is $421,000. The rate of general inflation experienced during the 8-year period has averaged 10% per year. At the time the land was purchased, Bravo intended to hold it for 20 years. At what amount should the land be carried on Bravo's books today?

Answer 1

Answer : $170, 000

Explanation

1) According to the historical cost concept you should record the original land  cost (means at the time of the land purchased )

2) assets are always recorded at their original cost or historical cost or acquisition cost in the books as  per the principle of historical cost

3) You should record or consider the fair market value , when you sold the asset . In this case you can record the gain or loss on sale of land in the books