company needed a new building It found a suitable location with an existing old

Question

company needed a new building It found a suitable location with an existing old building on the land. The 0, A company reached an agreement to buy the land and the building for $960,000 cash. The old building s demolished to make way for the needed new building. Following is information regarding the tion of the old building and construction of the new one: Constrection Demolition of old building Proceeds from sale of salvaged materials from old building Cost of new building (including $660,000 for new parking lot) S120,000 Select the journal entry listed below that should be prepared to record this situation A. Building 9,560,000 Land Gain on sale of salvaged materials Cash 1,260,000 120,000 10,700,000 B. Building 8,900,000 Land Gain on sale of salvaged materials Cash 1,920,000 120,000 10,700,000 C. Building 8,900,000 1,140,000 660,000 Land Land Improvements Cash 10,700,000 D. Building 8,900,000 1,140,000 660,000 Land Land Improvements 120,000 Gain on sale of salvaged materials Cash 10,580,000

Explanation / Answer

Answwer is C. Building Dr. 8900000 Land Dr. 1140000 land improvements Dr. 660000      Cash Account 10700000 Explanation: Total cost of land: Purchase price 960,000 Add: Demolition cost 300,000 Less: Salvage value of material 120000 Total cost of land: 1,140,000 Land improvement (cost incurred for parking lots is a part of land improvements) $660,000 Net cost of new building (9560,000 -660,000): 8,900,000

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