Question

In​ 1990, Johnson Company purchased a building for . In​ 2020, a real estate professional says the building has a fair value of . In​ 2020, a similar building down the street recently sold for​ $900,000. What​ value, before consideration of accumulated​ depreciation, is reported for the building on the balance sheet at December​ 31, 2020?

Answer 1

The numbers are missing in this question, but I will use make my own:

"In​ 1990, Johnson Company purchased a building for $400,000. In​ 2020, a real estate professional says the building has a fair value of $950,000."

The building must be reported at purchase cost (following the historical cost principle) and the only adjustment to its carrying value is accumulated depreciation. Fixed assets must always be reported at purchase cost and in this case would be $400,000.