A Company Needed a New Building Prepare a Single Journal Entry to Record the Above Costs

question 165

Essay

A company needed a new building.It found a suitable location with an existing old building on the land.The company reached an agreement to buy the land and the building for $960,000 cash.The old building was demolished to make way for the needed new building.Following is information regarding the demolition of the old building and construction of the new one:
$$\begin{array} { l l } \text { Construction cost of new building } & \$ 8,900,000 \\\text { Cost for parking lot } & \$ 260,000 \\\text { Denolition of old building } & 200,000 \\\text { Proceeds fron sale of salvaged materials from old building } & 70,000\end{array}$$
Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, where the cost is evenly spread over its useful life.

Renovation Cost

The expenses associated with updating or refurbishing an existing structure or space to improve its appearance or functionality.

Initial Investments

The initial outlay of cash required to start a project or an investment, often including purchase of equipment and other startup costs.

After-Tax Discount Rate

The discount rate that is applied to future cash flows after considering the effects of taxes.