Question

Clothing purchased​ land, paying $ 105 comma 000 cash and signing a $ 320 comma 000 note payable. In​ addition, Clawson paid delinquent property tax of $ 2 comma 000​, title insurance costing $ 850​, and $ 5 comma 500 to level the land and remove an unwanted building. Record the journal entry for purchase of the land. Begin by determining the cost of the land.

Answer 1

Land $433,350 (debit)

Cash $113,350 (credit)

Note Payable $ 320,000 (credit)

Step-by-step explanation:

IAS 16 - Cost of Asset includes Purchase Cost and other costs directly incurred in putting the asset in the location and condition intended for use by management.

Calculation of the Cost of Land

Purchase Price: Cash 105,000

: Note 320,000

Delinquent Property tax 2,000

Title Insurance 850

Preparation Costs 5,500

Total 433,350

Journal

Land $433,350 (debit)

Cash $113,350 (credit)

Note Payable $ 320,000 (credit)