On December 31,2012,Twisted Pretzel was told by an appraiser that its land,which cost $100,000,was worth $120,000.Under IFRS,Twisted Pretzel would be allowed to: show the land on its financial statements as ________.
A)an expense of $100,000 on the income statement
B)an expense of $120,000 on the balance sheet
C)an asset of $120,000 on the income statement
D)an asset of $120,000 on the balance sheet

Question

Quizplus · Accepted Answer

Under IFRS, an asset should be recognized at its fair value. Since the land has been valued at $120,000 by the appraiser, Twisted Pretzel can show it as an asset of $120,000 on its balance sheet. Option A is incorrect because land is a long-term asset and cannot be expensed immediately. Option B is incorrect because an expense cannot be reported on the balance sheet. Option C is also incorrect because it suggests reporting the land as an asset on the income statement, which is incorrect under any accounting framework.

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