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can someone tech me how to solve this problem for an accounting class?
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4 Responses to can someone tech me how to solve this problem for an accounting class?
I can help you learn how to solve the problem – you will teach yourself.
The question is intentionally cluttered with a lot of extra data – TMI – too much information. Filter it out and decide what the real question is.
The paragraph ends with the question, which, rephrased is – The land should be recorded on the purchaser’s books at what price?
Since most books and records are maintained on the cost basis you have to look for the purchaser’s cost. The answer is in there. Find it.
I am a Realtor ~~ Cocoa Beach, Fl…
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If the land is not part of a business combination (acquisition of another company), the purchaser records it at his cost, i.e. $137,000.
However, if the land is one of the assets in a business combination, current International Financial Reporting Standards require that the purchaser records it at fair value, which in this case would be $140,000. All assets and liabilities likewise need to be fair valued. The difference between the fair value and the amount paid (consideration) is put into a goodwill account on the balance sheet if the consideration exceeds total fair values, otherwise it is treated as an income in the income statement.
I am a Realtor ~~ Cocoa Beach, Fl…
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this seems to be a casual purchase of land.
IFRS said, it has to be valued to Fair Value w/c is $140,000. Leaving the difference of $3,000 to goodwill or a discount for that matter.
I am a Realtor ~~ Cocoa Beach, Fl…
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It must be recorded at historical cost, (the purchase price).
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