Company F purchases land for $500,000. Over the next year, the market value of the land appreciates to $600,000. Discuss how this appreciation should be accounted for, considering the Cost Concept and Realization Concept.

• The Cost Concept dictates that assets should be recorded at their historical cost. Therefore, the land should initially be recorded on the balance sheet at its purchase price of $500,000.
• However, the Realization Concept states that gains should not be recognized until they are realized. Since the appreciation in land value has not been realized through a sale or other transaction, it should not be recognized in the financial statements. The land should continue to be reported at its historical cost of $500,000 on the balance sheet until it is sold or until there is evidence of a permanent decrease in its value.