Question

Shahia company bought a building for $76,000 cash and the land on which it was located for $112,000 cash. the company paid transfer costs of $15,000 ($5,000 for the building and $10,000 for the land). renovation costs on the building before it could be used were $33,000.

Required:

1. Prepare the journal entry to record the purchase of the property, including all relevant expenditures. Assume that all transactions were for cash and that all purchases occurred at the start of the year.

Answer 1

The journal entry to record the purchase of the property, including all relevant expenditures, would include debiting the buildings and land accounts, and crediting the cash account for the amount paid. Transfer costs and renovation costs would be debited and the cash account would be credited as well.

Step-by-step explanation:

The journal entry to record the purchase of the property, including all relevant expenditures, would be as follows:

1. Debit Buildings - $76,000
2. Debit Land - $112,000
3. Credit Cash - $76,000
4. Credit Cash - $112,000
5. Debit Transfer Costs - $15,000
6. Credit Cash - $15,000
7. Debit Renovation Costs - $33,000
8. Credit Cash - $33,000

In this entry, we debit the buildings and land accounts to record the purchase of the property. We credit cash for the amount paid in cash for the property. Additionally, we debit the transfer costs and renovation costs accounts to record the relevant expenditures made.