Question

If land had a purchase cost of $30,000, broker fees were $500, city title filing fees were $200, and a temporary sign showing that the property was to be used for the site of a bank cost $575, the journal entry to record the Land cost would be?

Answer 1

The Land account is debited for the total sum of the purchase cost, broker fees, city title filing fees, and the cost of the sign, adding up to $31,275. The offsetting credit is made to either Cash or Accounts Payable for the same amount, depending on the payment method.

Step-by-step explanation:

The journal entry to record the Land cost would include the purchase cost of the land, the broker fees, city title filing fees, and the cost of the temporary sign. The total of these costs would be the debit to the Land account and the credit would go to Cash or Accounts Payable, depending on if the payment was made immediately or on credit.

Therefore, the journal entry is as follows:

• Land: $31,275 (debit)
• Cash/Accounts Payable: $31,275 (credit)

This entry records the cumulative cost of acquiring the land, which includes all ancillary costs directly attributable to the purchase.