On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000.

On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000.

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February 23, 2022
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Cost principle

On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000. On July 9, Ritts accepted the seller’s counteroffer of $275,000. On October 1, the land was assessed at a value of $280,000 for property tax purposes. On December 22, Ritts was offered $305,000 for the land by a national retail chain. At what value should the land be recorded in Ritts Roofing’s records?

Answer and ExplanationSolution by a verified expert

Here is a tip:
Land is considered a long-term asset that is reported on the balance sheet at cost.

Explanation
The cost principle requires that assets should be recorded at their original cost. In this case, the land should be recorded in the company's records at its full purchase price, which is $275,000.

Verified Answer
$275,000

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