In Year 2, the Denim Company bought an acre of land that cost $16,000. In Year 5, another company purchased a nearby acre of land for $29,000 and a different company purchased another nearby acre of land for $27,000. As a result, an appraiser estimated that the acre owned by Denim had increased in value to $28,000. If Denim prepares a balance sheet at the end of Year 5, the acre of land that it owns should be reported at:

(A) $16,300

(B) $29,300

(C) $27,300

(D) The average of all of the amounts.

Question

Business

Ainsley Martin

7 November, 06:34

In Year 2, the Denim Company bought an acre of land that cost $16,000. In Year 5, another company purchased a nearby acre of land for $29,000 and a different company purchased another nearby acre of land for $27,000. As a result, an appraiser estimated that the acre owned by Denim had increased in value to $28,000. If Denim prepares a balance sheet at the end of Year 5, the acre of land that it owns should be reported at:

(A) $16,300

(B) $29,300

(C) $27,300

(D) The average of all of the amounts.

+1

Answers (2)

Know the Answer?

Kaila Stone · Answer 1

A) $16,300

Explanation:

According to the concept of historical cost, long-term assets are recorded at their historical price on a company's balance sheet, since the historical cost is the cost of the 'product' when originally acquired by the company the answer should be $16,000, the closest answer is $16,300 it may be an error in the question or the extra $300 are related to the original price paid for the property.

Note: the price of the property has indeed increased, but the increment shouldn't be reported on the balance sheet of the company accordingly to the principle of historical cost (GAAP).

Jaiden Schaefer · Answer 2

Jaiden Schaefer 7 November, 07:37

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Explanation:

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