Land was acquired in 2018 for a future building site at a cost of $40,000. The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash payment of $46,000. The land should be reported in the financial statements at:
A) $40,000.
B) $27,000.
C) $46,000.
D) $48,000.

Question

Quizplus · Accepted Answer

Under the historical cost principle in accounting, assets are recorded at their original purchase price. Therefore, the land acquired for $40,000 should be reported at this amount in the financial statements, regardless of its current market value, assessed value for tax purposes, or any appraised or offered prices.

Land Was Acquired in 2018 for a Future Building Site