The city of Anchorage sold land for its appraised value to the Big Bear Oil Company on June 1, 2014, that originally cost the city $950,000. On June 1, 2014, the land was appraised at a value of $1,400,000, and on December 31, 2014, the land's value was estimated to be $1,450,000. On Big Bear Oil Company's balance sheet at December 31, 2014, the land should be valued at
A) $1,400,000
B) $1,450,000
C) $950,000
D) $0

Question

Quizplus · Accepted Answer

Under generally accepted accounting principles (GAAP), land is recorded at its historical cost. Since Big Bear Oil Company purchased the land for its appraised value of $1,400,000 on June 1, 2014, this is the amount that should be reflected on the balance sheet, regardless of its estimated value at a later date.

The City of Anchorage Sold Land for Its Appraised Value