A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at

Question

Quizplus · Accepted Answer

The plant site should be recorded on the manufacturer's books at its fair value, which reflects the true economic value of the asset. This will result in more accurate financial statements for the company. The nominal cost of taking title to it or assigning a value determined by the company's directors may not reflect the actual worth of the asset. Recording the site at one dollar would violate the cost principle of accounting, which requires that assets be recorded at their actual cost.

A Plant Site Donated by a Township to a Manufacturer