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
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter3: Review Of A Company's Accounting System
Section: Chapter Questions
Problem 11P: Worksheet Devlin Company has prepared the following partially completed worksheet for the year ended...
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Question
Prepare the entries to reallocate the proper balances into the Land, Buildings, and
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Account Titles and Explanation
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Debit
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Credit
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Dec. 31, 2020
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Dec. 31, 2020
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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.
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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