On December 31,2012,Twisted Pretzel was told by an appraiser that its land,which cost $100,000,was worth $120,000.How should Twisted Pretzel show this information on its financial statements prepared under U.S.GAAP?
A)Report a gain of $20,000 on its income statement.
B)Report land at $100,000 on its income statement.
C)Report land at $120,000 on its income statement.
D)Continue showing the land at its cost of $100,000.

Question

Quizplus · Accepted Answer

Under U.S.GAAP, land is generally recorded at its cost and is not adjusted to fair value unless there is a significant transaction such as a sale. Therefore, Twisted Pretzel should continue showing the land at its cost of $100,000 and not make any adjustments for the appraised value.

On December 31,2012,Twisted Pretzel Was Told by an Appraiser That