On January 1, 2000, Save-More Construction Company paid $150,000 in cash for a parcel of land to
Question:
On January 1, 2000, Save-More Construction Company paid $150,000 in cash for a parcel of land to be used as the site of a new office building. During March, the com- pany petitioned the City Council to rezone the area for professional office buildings. The City Council refused, preferring to maintain the area as a residential zone. After nine months of negotiation, Save-More Construction convinced the Council to re- zone the property for commercial use, thus raising its value to $200,000. For accounting purposes, what value should be used to record the transaction on January 1, 2000? At what value would the property be reported at year-end, after the City Council rezoning? Explain why accountants use historical costs to record transactions.
Step by Step Answer:
Survey Of Accounting
ISBN: 9780538846172
1st Edition
Authors: James D. Stice, W. Steve Albrecht, Earl Kay Stice, K. Fred Skousen