Question

On March 31, Higgins Repair Service extended an offer of $415,000 for land that had been priced for sale at $460,000. On April 15, Higgins Repair Service accepted the seller’s counteroffer of $437,500. On September 9, the land was assessed at a value of $375,000 for property tax purposes. On December 8, Higgins Repair Service was offered $475,000 for the land by a national retail chain. At what value should the land be recorded in Higgins Repair Service’s records?

Answer 1

The correct answer to the following question is $437,500.

Step-by-step explanation:

In their books Higgins Repair service should record the value of the land as $437,500, no matter offer the made and they offer receive for selling the land. They made a deal with seller on April 15 , to buy the land for $437,500 and as per the cost concept or principle in accounting , an asset should be recorded in the books of account at the amount paid for acquiring it and this amount would not change in situations of inflation or change in market value.