FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Loose Ends in Valuation
ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell this land now, it would incur cost to sell of P400,000. The following rates were gathered.
| Weighted average cost of capital | 15% |
| Land average price increase per year | 18% |
| Inflation rate | 4% |
Required: Assuming that ABC plans to sell the asset by the end of the fifth year, compute the following:
1. Cost of the land to be recognized in the accounting books
2. Selling price of the land
3. Cost to sell
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