@ CPA2014dream We are reversing that debit because technically its a prepay, so should be a prepaid expense. Entry below:
Prepaid expense Dr. 50,000
Accounts payable Cr 50,000
Originally the accounts payable balance was 850,000, but the credit will increase the balance to 900,000.
The key is “to be manufactured” which means we technically don't owe the money yet and the amount we paid is a prepay.
To answer your first question, we are trying assign cost to each lot. When we bought the land, we paid for the whole thing in bulk and added the costs of subdividing the land. No cost was assigned for each individual parse of land, so we will determine cost relative to the parse of lands sales price. If I have 4 pieces of land, and i'm selling each for 250, than 1 must be worth 25% of the sales price for all four together. So when i bought the land, 25% of the total cost must be allocated to each parcel of land.
FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.
.