Cala Manufacturing purchases a large lot on which an old building is located as part of its plans to build a new plant

Cala Manufacturing purchases a large lot on which an old building is located as part of its plans to build a new plant. The negotiated purchase price is $200,000 for the lot plus $95,000 for the old building. The company pays $37,900 to tear down the old building and $56,026 to fill and level the lot. It also pays a total of $1,714,392 in construction costs—this amount consists of $1,612,600 for the new building and $101,792 for lighting and paving a parking area next to the building.

Prepare a single journal entry to record these costs incurred by Cala, all of which are paid in cash.

Explanation:

Cost of land

Purchase price for land	$	200,000
Purchase price for old building		95,000
Demolition costs for old building		37,900
Costs to fill and level lot		56,026
Total cost of land	$	388,926

 
Cost of new building and land improvements

Cost of new building	$	1,612,600
Cost of land improvements		101,792
Total construction costs	$	1,714,392