Question

Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair value is greater.

Answer 1

The Eastman Kodak Company reports land on its balance sheet at the acquisition cost, following the historical cost principle, which aims to maintain consistency and reliability in financial reporting.

Step-by-step explanation:

The question relates to how the Eastman Kodak Company reports the value of its land on the balance sheet. The company records the land at its historical cost, which is the amount paid to acquire it, not at its current estimated fair value even if the fair value is higher. This practice is in accordance with the historical cost principle of accounting, which states that assets should be recorded at their cost at the time of purchase and not adjusted for increases in market value. The reasoning behind this is to provide consistency and reliability in financial reporting, as market values can be volatile and subject to subjective valuation methods.