Asked by Shams Fawzi on May 22, 2024
Verified
Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $220,000. Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?
A) $177,000
B) $212,000
C) $220,000
D) $232,000
Cost Concept
An accounting principle that states that all goods and services purchased by a business should be recorded at their cost price.
Appraisal
The process of professionally estimating the value of a property, typically performed by a certified appraiser.
Market Value
The current price at which an asset or service can be bought or sold in the open market.
- Familiarize oneself with the foundational aspects of accounting, including the business entity and cost concepts.
Verified Answer
JN
Jocellyn NoyolaMay 27, 2024
Final Answer :
B
Explanation :
Under the cost concept, assets are recorded at the cost to the acquiring company, which in this case is the purchase price of $212,000 that Focus Company agreed to pay for the land.
Learning Objectives
- Familiarize oneself with the foundational aspects of accounting, including the business entity and cost concepts.
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