Question

Cala Manufacturing purchases land for $390,000 as part of its plans to build a new plant. The company pays $33,500 to tear down an old building on the lot and $47,000 to fill and level the lot. It also pays con- struction costs of $1,452,200 for the new building and $87,800 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. Exercise 10-2 Recording costs of assets C1 Rodriguez Company pays $395,380 for real estate with land, land improvements, and a building. Land is appraised at $157,040; land improvements are appraised at $58,890; and the building is appraised at $176,670. Allocate the total cost among the three assets and prepare the journal entry to record the purchase. Exercise 10-3 Lump-sum purchase of plant assets C1

exercise 10-2 and 10-3 please

Answer 1

Exercise 10-2

Debit Land $3,90,000

Debit Dismantling cost $33,500

Debit Leveling Cost $47,000

Debit Construction Cost $1,452,200

Debit Lighting & Paving Area $87,800

Credit Cash $2,010,500  

As per IAS 16 Cost of asset consists of expenses which has endures future economic benefit.

Cost of Asset includes construction cost, development cost and Dismantling cost etc..

Exercise 10-3

Total appraised Cost

Land $157,040

Land Improvements $ 58,890

Building Cost $176,670

Total $392,600  

Amount Paid - $ 395,380

Cost to be apportioned:

Land - $157,040 * 395380/392600 = 158,152

Land Improvements $ 58,890 * 395380/392600 = 59,307   

Building Cost $176,670 * 395380/392600 = 177,921

Journal Entry

Debit Land $158,152

Debit Land Improvements $ 59,307

Debit Building Cost $177,921

Credit Cash $395,380