Macon Enterprises purchased land for $2,000,000 in 2001. In 2017, an independent appraiser assessed the value at $3,400,000. What amount should appear on the financial statements in 2017 with respect to the land and what accounting assumption or principle explains why?

Question

Business

Triston Mcfarland

24 May, 10:36

Macon Enterprises purchased land for $2,000,000 in 2001. In 2017, an independent appraiser assessed the value at $3,400,000. What amount should appear on the financial statements in 2017 with respect to the land and what accounting assumption or principle explains why?

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Answers (1)

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Rhys Hardin · Answer 1

The financial statements balance for land will be 2,000,000

Under the Cost and conservatism principles.

Explanation:

Property, Plant and Equipment are valued at cost.

The financial statements balance for land will be 2,000,000

Under the GAAP this should be the principles to explaing this reasoning:

Conservatism principle: Revenues, Gains and assets only when you are sure that they will occur. The land is not for sale, and it is not expected to be sold so the potencial gain for selling or valuation should not be recorded.

Cost principle: The bookkepper should post at their original purchase costs.