Question

Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $97,131. The Focus Company initially offered to buy the land for $110,715. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $103,413. Under the cost principle, at what amount should the land be recorded in the accounting records of Focus Company

Answer 1

$212,000

Step-by-step explanation:

Given that

Market value of the land = $97,131

Initial price to buy the land = $110,715

Purchase price = $212,000

Sale value of the land = $103,413

Based on the above information, the land should be recorded as per the cost principle is equal to the purchase price i.e $212,000 as it reflects the actual amount spent to purchase the land or we can say acquired price or actual price to acquired the land and the same is to be considered