Eight years ago, Bravo Company purchased land for $170, 000. The current fair market value of the land is $421,000. The rate of general inflation experienced during the 8-year period has averaged 10% per year. At the time the land was purchased, Bravo intended to hold it for 20 years. At what amount should the land be carried on Bravo's books today

Question

Figaro

Business

27 March, 21:14

Eight years ago, Bravo Company purchased land for $170, 000. The current fair market value of the land is $421,000. The rate of general inflation experienced during the 8-year period has averaged 10% per year. At the time the land was purchased, Bravo intended to hold it for 20 years. At what amount should the land be carried on Bravo's books today

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Answers (1)

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Kaiya Rodriguez · Answer 1

Answer: $170,000

Explanation:

According to the historical cost concept, the original cost value of a asset (i. e. land) should be recorded in the books. The original cost refers to the cost of a asset at the time of purchasing. As per the principle of historical cost, assets are always recorded as a original cost or historical cost or acquisition cost.

But when a person sold the asset then he will consider the fair market value.