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Cala Manufacturing purchases land for $390,000 as part of its plans to build a new plant. The company pays $33,500 to tear down an old building on the lot the and $47,000 to fill and level the lot. It also pays construction costs of $1,452,200 for the new building and $87,800 for lighting and paving a parking area. Prepare a single journal entry to record these costs incurred by Cala, all of which are paid in cash.

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Answer:

Explanation:

The journal entry is shown below:

Land A/c Dr $470,500

Land Improvement A/c Dr $87,800

Building A/c Dr $1,452,200

 To Cash A/c                               $2,010,500

(Being these costs are recorded)

The computation of the land is shown below:

= Purchase cost of new plant + tear down cost + fill and level the lot cost

= $390,000 + $33,500 + $47,000

= $470,500

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If Cala Manufacturing purchases land for $390,000 as part of its plans to build a new plant the single journal entry to record these costs incurred by Cala, all of which are paid in cash will be:

Dr Land $470,500

Dr Buildings $1,452,200

Dr Land improvements $87,800

Cr Cash  $2,010,500

Preparation of Cala Manufacturing Journal entry

Dr Land $470,500

($390,000+$33,500+$47,000)

Dr Buildings $1,452,200

Dr Land improvements $87,800

Cr Cash  $2,010,500

($470,500+$1,452,200+$87,800)

(To record costs incurred)

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