A local citizen donated land with a fair market value of $500,000 to the county government. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county should capitalize the new public park in the General Capital Assets accounts in the amount of

Question

Quizplus · Accepted Answer

The county should capitalize the land at its fair market value, which is $500,000. However, since the county incurred additional costs to develop the land into a public park, those costs should also be capitalized and added to the cost of the land. Therefore, the total amount to be capitalized is $500,000 + $150,000 = $650,000. The original cost that the donor paid for the land is not relevant in this situation.

A Local Citizen Donated Land with a Fair Market Value