Question

Highland Clothing purchased​ land, paying $ 92 comma 000 cash and signing a $ 300 comma 000 note payable. In​ addition, Highland paid delinquent property tax of $ 2 comma 100​, title insurance costing $ 950​, and $ 5 comma 800 to level the land and remove an unwanted building. Record the journal entry for purchase of the land

Answer 1

The Journal entry is as follows:

Land A/c Dr. $400,850

To Cash A/c $100,850

To Notes payable $300,000

(To record purchase of land with cash and notes payable)

Workings:

Purchase price of land = $392,000

Total cost of land:

= Purchase price of land + Property taxes + Title insurance + Removal of building

= $392,000 + $2,100 + $950 + $5,800

= $400,850