Question

Cala Manufacturing purchases land for $357,000 as part of its plans to build a new plant. The company pays $44,900 to tear down an old building on the lot and $66,374 to fill and level the lot. It also pays construction costs $1,616,200 for the new building and $102,019 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.

Answer 1

Answer and Explanation:

The journal entry to record the given cost is shown below:

Land Dr ($357,000 + $44,900 + $66,374) $468,274

Building Dr $1,616,200

Land improvement Dr $102,019

To Cash $2,186,493

(being the cash paid is recorded)

Here land, building & land improvement is debited as it increased the assets and credited the cash as it decreased the assets