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17 December, 09:15

Clothing purchased land, paying $ 105 comma 000 cash and signing a $ 320 comma 000 note payable. In addition, Clawson paid delinquent property tax of $ 2 comma 000 , title insurance costing $ 850 , and $ 5 comma 500 to level the land and remove an unwanted building. Record the journal entry for purchase of the land. Begin by determining the cost of the land.

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  1. 17 December, 09:42
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    Land $433,350 (debit)

    Cash $113,350 (credit)

    Note Payable $ 320,000 (credit)

    Explanation:

    IAS 16 - Cost of Asset includes Purchase Cost and other costs directly incurred in putting the asset in the location and condition intended for use by management.

    Calculation of the Cost of Land

    Purchase Price: Cash 105,000

    : Note 320,000

    Delinquent Property tax 2,000

    Title Insurance 850

    Preparation Costs 5,500

    Total 433,350

    Journal

    Land $433,350 (debit)

    Cash $113,350 (credit)

    Note Payable $ 320,000 (credit)
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