[ashley568]

Belle Company buys land for $50,000 on 12/31/06. As of 3/31/07, the land has appreciated in value to $50,500. On 12/31/06, the land has an appraised value of $51,800 By what amount should the Land account be increased in 2007?

I'm not asking for the answer to the question but I do not understand the question itself. If you could help me to understand the question I would greatly appreciate it.

[morgaine300]

They're trying to see if you understand whether the appreciation of the land and/or if the appraised value of the land will affect the cost the land is recorded on the books. So, do they? (I can't answer without knowing where you are. The way it's asking the question makes me wonder if you're outside the U.S.)

[ashley568]

No I'm in the US. It was a question for my Final Exam (I go to school online) It was a multiple choice test and I put 1,300. I just took a stab at because I didn't even know how to start this one. Think I was right? I just don't see how it can be 50,500 in 2007 but 51,800in 2006... I couldn't get my head around it.

[morgaine300]

I can't tell you if you're rigth because the rules could be different wherever you are. What I can tell you though is that by saying the land "appreciated," they may not be referring to the same thing as that appraised value. It did appreciate from the original cost. And that may be a market price, whereas the appraised value could be different. (Or of course, someone could have screwed up the problem.) Do you record at cost? If so, then it's on the books at the $50,000. It would then be a matter of whether you'd record the appreciation or not.