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Donner company is selling a piece of land adjacent to their business
Donner company is selling a piece of land adjacent to their business. An appraisal reported the market value of the land to be $190,000. The Focus Company initially offered to buy the land for $165,000. The companies settled on a purchase price of $175,000. On the same day, another of land on the same block sold for $180,000. Under the cost concept, what is the amount that Focus will use to record this transaction in their accounting records? a. $175,000 b. $180,000 c. $165,000 d. $190,000
Expert Solution
Answer
a .
Explanation
Cost concept also known as historical cost concept states that the asset should recorded at the cost at which it was acquired. So, land is to be recorded at the price paid to acquire it which is $175,000.
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