Question

Cala Manufacturing purchases land for $477,000 as part of its plans to build a new plant. The company pays $40,700 to tear down an old building on the lot and $60,165 to fill and level the lot. It also pays construction costs $1,535,600 for the new building and $96,932 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

(A) Record the Total Costs of the plant assets.

Transaction General Journal Debit Credit

1 Land 477000

Dismantling cost 40700

Leveling cost 60165

Construction cost 1535600

Lighting & Paving Area 96932

Cash 2210397

Note:

1. According to IAS 16 Cost of asset consists of expense which has endurs future economic benefit.

2. Cost of Asset includes construction cost ,development cost , Dismantling cost and lighting & paving area etc.