Question

Required Information E9-2 Computing and Recording a Basket Purchase and Straight-Line Depreciation [LO 9-2, LO 9-3] The following information applies to the questions displayed below] Bridge City Consulting bought a building and the land on which it is located for $135,000 cash. The land Is estimated to represent 50 percont of the purchase price. The company patd $6,000 for building renovations before it was ready for use E9-2 Part 2 Required: 2 Prepare the journal entry to record all expenditures. Assume that all transactions wwere for cash and they occurred at the start of the year. (If no entry Is required for e transection/event, select "No Journal Entry Required" In the first eccount fleld.)

Answer 1

In this case the renovation cost is incurred before use of building and thus would be capitalized to building account.
The purchase cost would be allocated to land and building equally.
Land cost	$67,500	135000*50%
Building cost	$72,500	(135000*50%)+6000
Total cash paid	$140,000
Journal entry to record all expenditures is shown below
Transaction	General Journal	Debit	Credit
1.	Land	$67,500
	Buildings	$72,500
	Cash		$140,000
	(To record cash paid)
Land and building asset account is debited for increase in balance as new asset is purchased.
Cash account being asset is credited for decrease in balance as there is cash outflow.