Manitou, Inc. purchased land for $92,000 by signing a note payable for the same

Question

Manitou, Inc. purchased land for $92,000 by signing a note payable for the same amount. Additionally, Manitou paid cash for the following: title insurance of $1,800, a commission of $9,200, $4,800 to remove an unwanted building $3,600 to level and grade the property. $12,000 for paving, $15,000 to construct a fence around the perimeter, and $5,200 for lighting. The journal entry for the cash payment is O A. O B. debit land $103,000, debit land improvement $40,600, credit cash $143,600 debit land $11,000, debit land improvement $40,600, credit cash $51,600 C. debit land S19,400, debit land improvement S32,200, credit cash $51,600 O D. debit land $111,400, debit land improvement $32,200, credit cash $143,600

Explanation / Answer

Land Cost

Land Cost = Tittle Insurance + Commission + Cost to remove unwanted building + cost to level and grade the property

= $1,800 + 9,200 + 4,800 + 3,600

= $19,200

Land improvement Cost

Land improvement Cost = Cost for Paving + Cost to construct a fence around the perimeter + Costs for lighting

= $12,000 + 15,000 + 5,200

= $32,200

Total Cash Payment = $19,200 + 32,200 = $51,600

Therefore, The Answer is “C. Debit Land $19,400, Debit land Improvement $32,200, Credit Cash $51,600”

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