On January 1, a company purchased land that was foreclosed on for $270,000. At the time of purchase, the fair market values of the land was $290,000. The gain from the purchase of the land is:

Question

Quizplus · Accepted Answer

Gains from the purchase of assets like land are not recognized at the time of purchase. The gain would only be realized if and when the land is sold for more than its cost. At the time of purchase, the accounting treatment is to record the asset at its cost, which is $270,000 in this case, regardless of its fair market value.

On January 1, a Company Purchased Land That Was Foreclosed