Donner Company is selling a piece of land adjacent to their business. An appraisal reported the market value of the land to be $120,000. The Focus Company initially offered to buy the land for $107,000. The companies settled on a purchase price of $115,000. On the same day, another piece of land on the same block sold for $122,000. Under the cost concept, what is the amount that will be used to record this transaction in the accounting records?
A) $107,000
B) $115,000
C) $120,000
D) $122,000

Question

Quizplus · Accepted Answer

The cost concept dictates that assets should be recorded at their historical cost, which is the amount paid to acquire the asset. In this case, the agreed upon purchase price of $115,000 is the amount that will be used to record the transaction in the accounting records, even though the market value was appraised at $120,000 and a similar property sold for $122,000.

Donner Company Is Selling a Piece of Land Adjacent to Their