Journal Entries for Property Purchase and Rennovation
Hello,
I'm hoping a CPA/Accountant might be able to point me to the right direction on this issue related to journal entries. I'm stuck with how to classified the renovation that I did for the property in my book.
Here are some background information.
For example, let's say I purchased a property for $100,000 and put in $50,000 to renovate the property. The bank is loaning me 80% of the purchase price AND the renovation cost ($150,000 x 80% = $120,000). After the renovation, the property is now worth $200,000. How do I make the journal entries for this? The following is what I have so far...
Debit Cash: $20,000 (i received a net $20,000 from the bank)
Debit Building: $150,000
Credit Long-term liabilities - Mortgage: $120,000
BUT, The debits and credit doesn't add up (...which is a cardinal sin according to the accounting god :-) ).
Please let me know what I am missing? Thanks!
David