On April 25, Gregg Repair Service extended an offer of $115,000 for land that had been priced for sale at $140,000. On May 3, Gregg Repair Service accepted the seller's counteroffer of $125,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On August 4, Gregg Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in Gregg Repair Service's records?
A) $115,000
B) $95,000
C) $140,000
D) $125,000

Question

Quizplus · Accepted Answer

The land was purchased for $125,000, so this is the cost basis for the asset. The fact that it was initially offered for $115,000 and later assessed for property tax purposes at $95,000 are not relevant to its recorded value. The offer made by the national retail chain of $150,000 is also not relevant for recording its initial value, as this is a subsequent event. Therefore, the land should be recorded at its purchase price of $125,000.

On April 25, Gregg Repair Service Extended an Offer of $115,000