Horan Industries purchased a parcel of land next to their existing plant for $700,000, in order to
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Question:
Horan Industries purchased a parcel of land next to their existing plant for $700,000, in order to expand operations. The seller was reluctant to sell initially so to persuade them, Horan offered a price that was twice the market value of the land. According to the historic cost concept, how should the purchase be recorded on the balance sheet?
- It should be reported at the purchase price of $700,000
- It should be reported at its fair market value of $350,000
- It should be reported at the value provided by an independent appraiser
- It should be reported at $700,000 and immediately report a loss of $350,000
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