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    deezerdoo's Avatar
    deezerdoo Posts: 34, Reputation: 2
    Junior Member
    		  
    #1

    Apr 16, 2007, 08:53 AM
    Appraised Land
    How does appraised land appear on the books?

    A company bought land for $1,200,000 in 1982 and it appraised at $1,795,000 in 2007

    I would think it would appear on the books in 2007 at its appraised value of 1,795,000, but I'm not sure.
    Smith21000's Avatar
    Smith21000 Posts: 69, Reputation: 9
    Junior Member
    		  
    #2

    Apr 16, 2007, 10:19 AM
    Historical cost is one of the accounting principals we are bound by, therefore it would still be listed on the books at cost of $1,200,000.

    In a merger or acquisition the situation could be handled differently.

    Please realize your "thinking" is not wrong, I would agree with you that the appraised value would represent a better picture of value to the financial statement user, however as I stated above we are bound by the rules in place that state historical cost is to be used. Your question opens a door of accounting theory which is kick around all the time. Hope this helps.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #3

    Apr 16, 2007, 01:20 PM
    Just to play devils advocate here…

    If we open the door to use appraised value for Land, what then?

    How can we insure statements from company to company are relevant at all?

    I can probably find you one person who says the land is worth $2.3 million, someone else saying it is only worth $1.4 million.

    Smith has answered your question correctly. Historical cost is the ONLY way we record Land, so you would keep it at the 1982 price level of $1.2 million.
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