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Cost principle On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000. On July 9, Ritts accepted the seller’s counteroffer of $275,000. On October 1, the land was assessed at a value of $280,000 for property tax purposes. On December 22, Ritts was offered $305,000 for the land by a national retail chain. At what value should the land be recorded in Ritts Roofing’s records?
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Cost principle
On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000. On July 9, Ritts accepted the seller’s counteroffer of $275,000. On October 1, the land was assessed at a value of $280,000 for property tax purposes. On December 22, Ritts was offered $305,000 for the land by a national retail chain. At what value should the land be recorded in Ritts Roofing’s records?
Identify the value in which the land should be recorded in the books of RR Service.
Explanation of Solution
Cost principle: This is an accounting principle which states that the actual cost paid in receipt of the asset is the reliable measure and hence assets and services should be recorded at actual cost or historical cost.
- ■ RR Service extended the offer for $250,000, when the land was priced at $300,000. But RR Service did not buy at that price. So, this price should not be recorded as per cost principle...
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