**Gibbs Manufacturing Co. Financial Transactions Overview (1925)**Gibbs Manufacturing Co. was incorporated on January 2, 1925, but manufacturing could not commence until August 1, 1925, as the new factory facilities were incomplete. The financial records for the Land and Buildings as of December 31, 1925, maintained by a novice bookkeeper are as follows:| Date | Item | Amount ||------------|------------------------------------------------|---------|| 1/31/25 | Land and dilapidated building | $200,000|| 2/28/25 | Cost of removing building | $4,000 || 4/1/25 | Legal fees | $6,000 || 5/1/25 | Fire insurance premium payment | $5,400 || 5/1/25 | Special tax assessment for streets | $4,500 || 5/1/25 | Partial payment of new building construction | $210,000|| 8/1/25 | Final payment on building construction | $210,000|| 8/1/25 | General expenses | $30,000 || 12/31/25 | Asset write-up | $75,000 || **Total** | | **$744,900** |### Additional Information1. **Land and Building Acquisition** - On January 31, 1925, the company paid $100,000 in cash and issued 1,000 shares of its common stock (par value = $100/share) with a fair market value of $180/share for land and building acquisition.2. **Building Removal and Material Sale** - Gibbs paid Kwik Demolition Co. $4,000 for building removal and received $1,500 from selling salvaged material.3. **Legal Fees Explanation** - Totaled $6,000, covering the following: - Cost of organization: $2,500 - Title examination related to land purchase: $2,000 - Legal work for building construction: $1,5004. **Fire Insurance Premium** - Covered a three-year term starting May 1, 1925.5. **General Expenses Details** - For the period from January 2

Assets - Computation of Proper Balance Particulars Land Buildings Expense Acquisition cost of land and dilapidated building* 280000 Cost of removing building 4000 Sale proceeds of salvaged material -1500 Legal fees 2000 1500 2500 Fire insurance premium ($5400 x 3/36) 450 4800 Special tax assessment for streets 4500 Partial payment of new building construction 210000 Final payment on building construction 210000 General expenses 10000 20000 Proper balance as of 12/31/20 289000 431950 27300 *Acquisition cost of land and dilapidated building = $100000 + (1000 x $180) = $100000 + $180000 = $280000

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2. Gibbs Manufacturing Co. was incorporated on 1/2/25 but was unable to begin manufactu activities until 8/1/25 because new factory facilities were not completed until that date. The Land Buildings account set up by an inexperienced bookkeeper at 12/31/25 per the books was as follow Item Land and dilapidated building Cost of removing building Legal fees Fire insurance premium payment 5/1/25 Special tax assessment for streets Date 1/31/25 2/28/25 4/1/25 5/1/25 Amount $200,000 4,000 6,000 5,400 4,500

2. Gibbs Manufacturing Co. was incorporated on 1/2/25 but was unable to begin manufactu activities until 8/1/25 because new factory facilities were not completed until that date. The Land Buildings account set up by an inexperienced bookkeeper at 12/31/25 per the books was as follow Item Land and dilapidated building Cost of removing building Legal fees Fire insurance premium payment 5/1/25 Special tax assessment for streets Date 1/31/25 2/28/25 4/1/25 5/1/25 Amount $200,000 4,000 6,000 5,400 4,500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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