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30 June, 16:37

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 the and $47,000 to fill and level the lot. It also pays construction 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.

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  1. 30 June, 19:27
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    The journal entry is shown below:

    Land A/c Dr $470,500

    Land Improvement A/c Dr $87,800

    Building A/c Dr $1,452,200

    To Cash A/c $2,010,500

    (Being these costs are recorded)

    The computation of the land is shown below:

    = Purchase cost of new plant + tear down cost + fill and level the lot cost

    = $390,000 + $33,500 + $47,000

    = $470,500
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