Question

Blossom Clinic purchases land for ( $ 440,000 ) cash. The clinic assumes ( $ 5,300 ) in property taxes due on the land. The title and attorney fees totaled ( $ 3,000 ). The clinic had the land appraised, incurring a cost of ( $ 1,200 ). Prepare the journal entry for the land purchase, including the associated costs and property taxes.

Answer 1

The journal entry for Blossom Clinic's land purchase sums the costs of the land, property taxes due, title and attorney fees, and appraisal fee, which are all capitalized as part of the land cost. The total debited to the Land account is $449,500, with credits to Cash of $440,000 and Property Taxes Payable of $5,300.

Step-by-step explanation:

To prepare the journal entry for Blossom Clinic's land purchase, we must first add up all associated costs to the purchase price. The land costs $440,000, and the clinic assumes $5,300 in property taxes. Additionally, title and attorney fees total $3,000, and the appraisal fee is $1,200. All of these costs are capitalized as part of the land cost on the balance sheet.

The journal entry to record the land purchase is as follows:

• Debit Land for $449,500 (440,000 + 5,300 + 3,000 + 1,200)
• Credit Cash for $440,000
• Credit Property Taxes Payable for $5,300

By capitalizing the additional costs, Blossom Clinic reflects the true cost of acquiring the land on its balance sheet, providing a more accurate representation of the company's assets.