Gibbs Manulactuning Co. was incorporated on 1/2/20 but was unable to begin manufacturing activities until 8/1/20 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/20 per the books was as follows: Date 1/31/20 2/28/20 4/1/20 5/1/20 5/1/20 5/1/20 8/1/20 8/1/20 12/31/20 Item Land and dilapidated building Cost of removing building Legal fees Fire insurance premium payment Special tax assessment for streets Partial payment of new building construction Final payment on building construction General expenses Asset write-up Amount $200,000 4,000 6,000 5,400 4,500 210,000 210,000 30,000 75,000 $744.900 Additional information: 1. To acquire the land and building on 1/31/20, the company paid $100,000 cash and 1,000 shares of its common stock (par value = $100/share) which is very actively traded and had a fair value per share of $180. 2. When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000, but also received $1,500 from the sale of salvaged material. 3. Legal fees covered the following: Cost of organization Examination of title covering purchase of land Legal work in connection with the building construction $2,500 2,000 1.500 $6,000 4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2020. 5. General expenses covered the following for the period 1/2/20 to 8/1/20. President's salary Plant superintendent covering supervision of new building $20,000 10,000 $30.000 6. Because of the rising land costs, the president was sure that the land was worth at least $75,000 more than what it cost the company. Instructions Determine the proper balances as of 12/31/20 for a separate land account and a separate buildings account. Use separate T-accounts (one for land and one for buildings) labeling all the relevant amounts and disclosing all computations.
Gibbs Manulactuning Co. was incorporated on 1/2/20 but was unable to begin manufacturing activities until 8/1/20 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/20 per the books was as follows: Date 1/31/20 2/28/20 4/1/20 5/1/20 5/1/20 5/1/20 8/1/20 8/1/20 12/31/20 Item Land and dilapidated building Cost of removing building Legal fees Fire insurance premium payment Special tax assessment for streets Partial payment of new building construction Final payment on building construction General expenses Asset write-up Amount $200,000 4,000 6,000 5,400 4,500 210,000 210,000 30,000 75,000 $744.900 Additional information: 1. To acquire the land and building on 1/31/20, the company paid $100,000 cash and 1,000 shares of its common stock (par value = $100/share) which is very actively traded and had a fair value per share of $180. 2. When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000, but also received $1,500 from the sale of salvaged material. 3. Legal fees covered the following: Cost of organization Examination of title covering purchase of land Legal work in connection with the building construction $2,500 2,000 1.500 $6,000 4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2020. 5. General expenses covered the following for the period 1/2/20 to 8/1/20. President's salary Plant superintendent covering supervision of new building $20,000 10,000 $30.000 6. Because of the rising land costs, the president was sure that the land was worth at least $75,000 more than what it cost the company. Instructions Determine the proper balances as of 12/31/20 for a separate land account and a separate buildings account. Use separate T-accounts (one for land and one for buildings) labeling all the relevant amounts and disclosing all computations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Gibbs Manufacturing Co. was incorporated on 1/2/20 but was unable to begin manufacturing
activities until 8/1/20 because new factory facilities were not completed until that date. The Land
and Buildings account at 12/31/20 per the books was as follows:
Date
1/31/20
2/28/20
4/1/20
5/1/20
5/1/20
5/1/20
8/1/20
Item
Land and dilapidated building
Cost of removing building
Legal fees
Fire insurance premium payment
Special tax assessment for streets
Partial payment of new building construction
Final payment on building construction
General expenses
Asset write-up
_Amount
$200,000
4,000
6,000
5,400
4,500
210,000
210,000
30,000
75,000
$744.900
8/1/20
12/31/20
Additional information:
1. To acquire the land and building on 1/31/20, the company paid $100,000 cash and 1,000
shares of its common stock (par value = $100/share) which is very actively traded and had a
fair value per share of $180.
2. When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000, but also received
$1,500 from the sale of salvaged material.
3. Legal fees covered the following:
Cost of organization
Examination of title covering purchase of land
Legal work in connection with the building construction
$2,500
2,000
1,500
$6.000
4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2020.
5. General expenses covered the following for the period 1/2/20 to 8/1/20.
President's salary
Plant superintendent covering supervision of new building
$20,000
10.000
$30.000
6. Because of the rising land costs, the president was sure that the land was worth at least
$75,000 more than what it cost the company.
Instructions
Determine the proper balances as of 12/31/20 for a separate land account and a separate
buildings account Use separate T-accounts (one for land and one for buildings) labeling all the
relevant amounts and disclosing all computations.
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