Question

Exercise 1: On March 1, 2008, Penner Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $8,600; the salvaged materials were sold for $1.700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $5,000 real estate broker's fee, $7,800 architect's fee. Instruction: Compute and journalize the acquisition cost for the land. Solution: Land cost Land price $80,000 Old warehouse razing 8,600 Salvage material sale -1.700 Expenditures before construction began: Attorney fees 1,100 Real estate broker's fees 5,000 Architect' fees (building cost) ca total 93,000 Dr Cr Journal entry: Land Building 93,000 7,800 Cash 100,800

Answer 1

The computation provided is correct.

Though in the question it is asked to provide the journal entry for land so the entry is:-

land	93000
cash		93000

and journal entry for building is :-

Building	7800
CAsh		7800

Though the compound entry is also correct.