Question

On May 19, Integrity Repair Service extended an offer of $335,000 for land that had

been priced for sale at $363,000. On June 4, Integrity Repair Service accepted the seller's
counteroffer of $345,000. On October 10, the land was assessed at a value of $290,000
for property tax purposes. On February 5 of the next year, Integrity Repair Service was
offered $380,000 for the land by a national retail chain. At what value should the land
be recorded in Integrity Repair Service's records?

Answer 1

$345,000

Step-by-step explanation:

Counter offer: The counter-offer is the changes made in the existing offer terms and conditions. It is usually made for negotiations, in which both the party can agree at the final price.

According to the accounting principles, the land value should be recorded at the historical cost but in the given case, it is recorded at the counter offer value because, in this offer, both the parties are ready to buy and sell the fixed assets i.e land.

It records only purchase cost of the land ,not any land improvement costs. So, only $345,000 should be recorded in Integrity Repair Service's records