Olmos Company purchased a tract of land for \(\$ 180,000\) in 1983 , when the general price index was 84.2. At the same time, a price index for land values in the area of Olmos's tract was 90.5 . In 1984, when the general price index was 88.6 and the specific price index for land was 102.3 , Olmos bought another tract of land for \(\$ 240,000\). In late 1991 , the general price index is 160.2 and the price index for land values if 245.6 .

\section*{Required}

1. In preparing a balance sheet at the end of 1991 , what amount should be shown for land on:

a. A historical cost/nominal dollar balance sheet.

b. A historical cost/constant purchasing power balance sheet.

c. A current cost balance sheet.

Round all amounts to the nearest whole dollar.

2. In Olmos Company's December 1991 meeting of the board of directors, one director insists that Olmos has incurred a loss of purchasing power as a result of owning the land. A second director argues that there could not have been a purchasing power gain or loss since land is a nonmonetary asset. Which director do you think is correct? Explain your answer.