The city's new tax collector foreclosed on a piece of land. The fair market value of the land at the time of foreclosure was $9,000. The taxpayer had acquired the property at a cost of $11,000. The past due taxes on the property totaled $4,000. The city plans to retain the land for its use. The land should be recorded in the General Capital Assets accounts in the amount of

Question

Quizplus · Accepted Answer

The land should be recorded at its fair market value at the time of foreclosure, which is $9,000. However, since the city plans to retain the land for its use, it should also record the past due taxes as a revenue (credit) in the amount of $4,000. Therefore, the net amount to be recorded in the General Capital Assets accounts is $9,000 - $4,000 = $5,000.

The City's New Tax Collector Foreclosed on a Piece of Land