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Marigold Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until July 1, 2020, because new factory facilities were not completed until that date. The Land and Building account at December 31, 2020, contained the following entries and balance: 2020 Jan. 31 Land and building Feb. 28 Cost of removal of building May 1 Partial payment of new construction 1 Legal fees paid June 1 Second payment on new construction 40,060 1 Insurance premium 1,920 N 1 Special tax assessment 3,610 30 General expenses 35,920 July 1 Final payment on new construction 1 Payment for HVAC (furnace, air conditioning system) Dec. 31 Asset write-up to market value 31 Depreciation for 2020 at 1% Account balance $165,830 9,520 60,350 3,640 10,350 29,800 43,710 404,710 4,047 $400,663

Marigold Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until July 1, 2020, because new factory facilities were not completed until that date. The Land and Building account at December 31, 2020, contained the following entries and balance: 2020 Jan. 31 Land and building Feb. 28 Cost of removal of building May 1 Partial payment of new construction 1 Legal fees paid June 1 Second payment on new construction 40,060 1 Insurance premium 1,920 N 1 Special tax assessment 3,610 30 General expenses 35,920 July 1 Final payment on new construction 1 Payment for HVAC (furnace, air conditioning system) Dec. 31 Asset write-up to market value 31 Depreciation for 2020 at 1% Account balance $165,830 9,520 60,350 3,640 10,350 29,800 43,710 404,710 4,047 $400,663

FINANCIAL ACCOUNTING
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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Prepare the entries to reallocate the proper balances into the Land, Buildings, and Accumulated Depreciation accounts at December 31, 2020.

Date
Account Titles and Explanation
                         Debit
                   Credit
Dec. 31, 2020
                                                            
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
  (To record correction for
initial entries of transactions)		    
Dec. 31, 2020
                                                            
 
 
                                                             
 
 
                                                             
 
 
                                                             
 
 
  (To correct recording of
depreciation expense)		    
 
 
 
 
 
 
 
The following additional information needs to be considered. 1. 2. 3. 4. 5. 6. 7. 8. To acquire land and a building, the company paid $110,570 cash and 690 of its, $10 cumulative preferred shares. The fair value of each share was estimated at $96 per share; however, Marigold's shares are not actively traded. The land and building were assessed by an independent, reliable valuator to have a combined fair value of $165,830. The costs for removing the building amounted to $9,520, and the demolition company kept all the salvaged building materials. Legal fees covered the following: Land title search before purchase Legal work in connection with construction contract $1,050 2,590 $3,640 The insurance premium covered the building for a two-year term beginning May 1, 2020. The special tax assessment by the municipality covered street improvements that are permanent in nature. General expenses covered the following for the period from January 2, 2020, to June 30, 2020: President's salary during construction Plant superintendent's wages covering supervision of new building $32,030 3,890 $35.920 Because of a general increase in construction costs after entering into the building contract, the board of directors increased the building's value by $43,710. It believed that such an increase was justified to reflect the current market at the time when the building was completed. Retained Earnings was credited for this amount. The estimated life of the building structure is 50 years. The depreciation for 2020 on the building structure was 1% of the asset value (1% of $404,710, or $4,047). The estimated useful life of the building HVAC (heating system, ventilation, air conditioning) is 20 years. No depreciation has been recorded on the building HVAC. Marigold expects no residual value at the end of the useful life of HVAC assets.
Transcribed Image Text:The following additional information needs to be considered. 1. 2. 3. 4. 5. 6. 7. 8. To acquire land and a building, the company paid $110,570 cash and 690 of its, $10 cumulative preferred shares. The fair value of each share was estimated at $96 per share; however, Marigold's shares are not actively traded. The land and building were assessed by an independent, reliable valuator to have a combined fair value of $165,830. The costs for removing the building amounted to $9,520, and the demolition company kept all the salvaged building materials. Legal fees covered the following: Land title search before purchase Legal work in connection with construction contract $1,050 2,590 $3,640 The insurance premium covered the building for a two-year term beginning May 1, 2020. The special tax assessment by the municipality covered street improvements that are permanent in nature. General expenses covered the following for the period from January 2, 2020, to June 30, 2020: President's salary during construction Plant superintendent's wages covering supervision of new building $32,030 3,890 $35.920 Because of a general increase in construction costs after entering into the building contract, the board of directors increased the building's value by $43,710. It believed that such an increase was justified to reflect the current market at the time when the building was completed. Retained Earnings was credited for this amount. The estimated life of the building structure is 50 years. The depreciation for 2020 on the building structure was 1% of the asset value (1% of $404,710, or $4,047). The estimated useful life of the building HVAC (heating system, ventilation, air conditioning) is 20 years. No depreciation has been recorded on the building HVAC. Marigold expects no residual value at the end of the useful life of HVAC assets.
Marigold Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until July 1, 2020, because new factory facilities were not completed until that date. The Land and Building account at December 31, 2020, contained the following entries and balance: 2020 Jan. 31 Feb. 28 May June July 1 1 1 1 1 30 1 1 Dec. 31 31 Land and building Cost of removal of building Partial payment of new construction Legal fees paid Second payment on new construction Insurance premium Special tax assessment General expenses Final payment on new construction Payment for HVAC (furnace, air conditioning system) Asset write-up to market value Depreciation for 2020 at 1% Account balance $165,830 9.520 60,350 3,640 40,060 1,920 3,610 35,920 10,350 29,800 43,710 404,710 4,047 $400,663
Transcribed Image Text:Marigold Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until July 1, 2020, because new factory facilities were not completed until that date. The Land and Building account at December 31, 2020, contained the following entries and balance: 2020 Jan. 31 Feb. 28 May June July 1 1 1 1 1 30 1 1 Dec. 31 31 Land and building Cost of removal of building Partial payment of new construction Legal fees paid Second payment on new construction Insurance premium Special tax assessment General expenses Final payment on new construction Payment for HVAC (furnace, air conditioning system) Asset write-up to market value Depreciation for 2020 at 1% Account balance $165,830 9.520 60,350 3,640 40,060 1,920 3,610 35,920 10,350 29,800 43,710 404,710 4,047 $400,663
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