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 $578,900, paying $148,200 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 $521,100 and $57,800, respectively. The old building will be demolished and a new apartment building will be constructed on the site. 9 Paid legal fees of $11,850 on the real estate purchase of February 7 15 Paid $27,100 to demolish the old building and make the land ready for the construction of the apartment building. 17 Received $8,320 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. Mar. 2 Paid architect fees of $36,780 to design the apartment building July 2 The full cost for construction of the apartment building was $1,336,400. Paid $349,600 cash and signed a bank loan payable for the balance 3 Purchased a one year insurance policy on the finished building for $6,300 Aug. 29 Paid $25,190 for the paving of sidewalks and a parking lot for the building.

Explanation / Answer

Amount in $ Date General Journal Debit Credit Feb-07 Land 578900 Cash 148200 Mortgage Payable 430700 To record the purchase of land Note : Since the intention of the entity is to demolish an old building and construct a new Building it its place, the entire cost of an old building will be considered as cost of land. Also, any demolition expenses of an old building will be considered as part of cost of Land Feb-09 Land 11850 Cash 11850 To record the capitalization of incurrance of legal fees Feb-15 Land 27100 Cash 27100 To record the capitalization of demolition expenditure of old building Feb-17 Cash 8320 Land 8320 To record the sale of materials as reduction from capital expenditure Feb-28 Land 2000 Cash 2000 To record the capitalization of incurrance of grading expenses of land Mar-02 Building 36780 Cash 36780 To record the capitalization of incurrance of arcitect fees for construction. Jul-02 Building 1336400 Cash 349600 Bank Loan 986800 To record the full cost of construction of building Jul-03 Prepaid Insurance/Insurance expense 6300 Cash 6300 To record the insurance of finished building Aug-29 Land Improvements 25190 Cash 25190 To record the expenses for paving of sidewalks and parking lot of building

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