Question

The following activity happened during the current year for Think Big Coprporation:
a) January 1 purchased land with a usable office building thereon for cash of $200,000. Tax assessment values: Land $20,000; building $60,000

b) January 1 purchased land for future building site for a cash cost of $40,000; an old building on this site, appraised at $2,000 at the date of purchase, is to be torn down immediately.

c)Net cash cost of demolishing the old building in (b) above amounted to $2,000.
D) Cash cost of excavation for basement of the new building (b above) was $6,000.

E) Lawyers' fees paid in connection with purchase of real estate in (b) $900.

F)Taxes paid on land purchased in (b) assessed before completion of building, $300.

g)Factory superintendent's salary for the year was $24,000. During the year, the superintendent spent the first six months supervising construction of the new building; the next three months supervising installation of productive machinery in the new building, and the last three months supervising operations in the new building.

h)Cost of grading and paying parking space and walks behind new building, $9,500.

i) Brick work amounting to $900 was performed on the building's exterior. This amount is deemed material and the work is expected to last for 20 years.

Required
Prepare the journal entries for each activity.

Answer 1

Transaction	Account Titles and Explanation	Debit	Credit
a.	Land ($200000 x $20000/$80000)	50000
	Office building ($200000 x $60000/$80000)	150000
	Cash		200000
	(To record purchase of land and office building)
b.	Land	40000
	Cash		40000
	(To record purchase of land with old building)
c.	Land	2000
	Cash		2000
	(To record cost of demolition of old building)
d.	Building	6000
	Cash		6000
	(To record excavation cost for basement of new building)
e.	Land	900
	Cash		900
	(To record lawyer's fees paid in connection with purchase)
f.	Property tax expense	300
	Cash		300
	(To record taxes paid on land)
g.	Building ($24000 x 6/12)	12000
	Equipment ($24000 x 3/12)	6000
	Factory overhead ($24000 x 3/12)	6000
	Salaries expense		24000
	(To record factory superintendent's salary)
h.	Land improvement	9500
	Cash		9500
	(To record cost of grading and paving parking space and walks)
i.	Building	900
	Cash		900
	(To record cost of brick work)