Problem 9-2A (Part Level Submission) For the year ended December 31, 2015, Westl

Question

Problem 9-2A (Part Level Submission) For the year ended December 31, 2015, Westlake Ltd. had the following transactions related to the purchase of property. Assume all transactions are for cash unless otherwise stated. Feb. 7 Purchased real estate for $562,700, paying $152,100 cash and signing a mortgage payable for the balance. The site had an old building on it and the fair values of the land and building were $498,800 and $63,900, respectively. The old building will be demolished and a new apartment building will be constructed on the site. 9 Paid legal fees of $10,270 on the real estate purchase of February 7, 15 Paid $28,500 to demolish the old building and make the land ready for the construction of the apartment building 17 Received $8,100 from the sale of material from the demolished building 28 Paid $2,000 to grade the land in preparation for the construction of the apartment building Paid architect fees of $36,910 to design the apartment building The full cost for construction of the apartment building was $1,284,700. Paid $336,600 cash and signed a bank loan payable for the balance. Purchased a one-year insurance policy on the finished building for $6,210. Paid $25,270 for the paving of sidewalks and a parking lot for the building Mar. 2 July 2 3 Aug. 29

Explanation / Answer

Journal Entries - Date Account Titles and Explanation Debit Credit 7-Feb Land $562,700 Cash $152,100 Mortgage Payable $410,600 (To record purchase of land partly using cash and partly on mortgage) 9-Feb Land $10,270 Cash $10,270 (To record payment of legal fees on real estate purchase) 15-Feb Land $28,500 Cash $28,500 (To record demolition expenses on old building on land) 17-Feb Cash $8,100 Land $8,100 (To record proceeds from sale of material from demolished building) 28-Feb Building $2,000 Cash $2,000 (To record payment made towards grade of land for building construction) 2-Mar Building $36,910 Cash $36,910 (To record architect fees paid to design the building) 2-Jul Building $1,284,700 Cash $336,600 Mortgage Payable $948,100 (To record building construction cost paid partly in cash and partly through mortgage) 3-Jul Prepaid Insurance $6,210 Cash $6,210 (To record insurance purchased for 1 year) 29-Aug Land Improvements $25,270 Cash $25,270 (To record payment made towards land improvements)

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