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

question 160

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:
$$\begin{array}{l}\begin{array} { | l | r | } \hline \text { Construction cost of new building including } \$ 660,000\\ { \text { For parking lot } } & \$9 , 5 6 0 , 0 0 0 \\\hline \text { Denolition of old buildirn } & 3 0 0 , 0 0 0 \\\hline \text { Proceeds from sale of salvaged materials from old building } & 120,000 \\\hline\end{array}\end{array}$$
Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

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Definitions:

Bilateral Contract

A bilateral contract is a mutually binding agreement in which each party makes a promise to the other, such as a promise to perform a service in exchange for payment.

Illusory Promise

Describes a statement or agreement that appears to be a promise but is too vague or has terms that allow the promisor to avoid any real obligation.

Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.

Student Debt

Loans accumulated through financing higher education, often a significant financial burden for graduates.