Question

Cala manufacturing purchases a large lot on which an old building is located as part of its plans to build a new plant. the negotiated purchase price is $264,000 for the lot plus $159,000 for the old building. the company pays $32,000 to tear down the old building and $47,304 to fill and level the lot. it also pays a total of $1,309,874 in construction costs—this amount consists of $1,232,100 for the new building and $77,774 for lighting and paving a parking area next to the building.

Answer 1

Cost of Land:Purchase price for land: 264,000Purchase price for old building : 159,000Demolition cost for old building: 32,000Cost to fill and level lot: 47,304Total cost of Land:  502,304


Cost of new building and Land improvementCost of new building: 1,232,100Cost of land improvements: 77,774Total construction cost:  1,309,874

Land (Debit 502,304)Land improvement (Debit 77,774)Building (Debit 1,232,100)Cash (Credit 1,812,178)