Question

We purchased a building with a market value of $150,000 for $125,000 cash. The seller paid $50,000 when they originally purchased the building. What amount is used when we record the purchase of the building

Answer 1

$125,000

Step-by-step explanation:

When records are made of a purchase we do not consider the original price the seller bought the item or the fair market value of the good.

We record the amount that was actually paid while purchasing the good.

In this scenario although the the fair market value of the building was $150,000 and the price the owner originally bought it was $50,000, the amount we will record for the purchase is what was paid. That is $125,000