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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

  1. a. Land with an assessed value of $750,000 for property tax purposes is acquired by a business for $900,000. Ten years later, the plot of land has an assessed value of $1,200,000 and the business receives an offer of $2,000,000 for it. Should the monetary amount assigned to the land in the business records now be increased?
  2. b. Assuming that the land acquired in (a) was sold for $2,125,000, how would the various elements of the accounting equation be affected?

(a)

To determine

Explain whether the amount at which the land is recorded should be changed according to the appraised value of land.

Explanation

Cost concept: This is an accounting concept 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...

(b)

To determine

Indicate the effect of sale of land for $2,125,000, on the accounting equation.

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