(classification of land andbuidling costs) Lenny Wilkins company was incorporate
ID: 2457529 • Letter: #
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(classification of land andbuidling costs) Lenny Wilkins company was incorporatedon Jan 2, 2008, but was unable to begin manufacturing activities until July 1,2008, because new factory facilities were not completed until that date. The land and building account reportedthe following items during 2008 31-Jan Land and building 160,000 28-Feb Cost of removal of building 9,800 1-May Partial payment of new construction 60,000 1-May Legal fees paid 3,770 1-Jun Second payment on new construction 40,000 1-Jun Insurance premium 2,280 1-Jun Special tax assessment 4,000 30-Jun General expenses 36,300 1-Jul Final payment on new construction 40,000 31-Dec Asset write-up 43,800 399,950 31-Dec Depreciation-2008 at 1% 4,000 31-Dec Account balance 395,950 The follwing additional info is to beonsidered. 1) To acquire landd and building thecompany paid $80,000 cash and 800 shares of its 8% cumulative preferred stock,par value $100 per share. Fair market value $100 per share. Fair market valueof the stock is $107 per share. 2) Cost of removal of old buildingsamounted to $9,800, and the demolition company retained all materials of thebuilding. 3) Legal fees covered thefollowing: Cost of organiztion 610 Examination of title covering purchase of land 1300 Legal work in connection with constructioncontract 1860 3770 4) Insurance premium covered thebuilding for a 2-year term beginning May 1, 2008 5) The special tax assessment coveredstreet improvements that are permanent in nature 6) General expenses covered thefollowing for the period from Jan 2, 2008 to June 30,2008 Presidents salary 32,100 Plant superintendent covering supervision of newbuidling 4,200 36,300 7) Because of a general increase inconstrucion costs after entering into the building contract, the board of directorsincreased the value of the building $43,800, believing that such an increase was justified toreflect the current market at the time the building was completed. Retained earningswas credited for theis amount 8) Estimated life of building-50years Depreciation for 2008-1% of asset value(1% of $400,000 or $4,000) Instructions: a) prepare entried to reflect correctland, building, and depreciation accounts at 12/31/08 b) show the proper presentaion ofland, building, and depreciation on the balance at 12/31/08 (classification of land andbuidling costs) Lenny Wilkins company was incorporatedon Jan 2, 2008, but was unable to begin manufacturing activities until July 1,2008, because new factory facilities were not completed until that date. The land and building account reportedthe following items during 2008 31-Jan Land and building 160,000 28-Feb Cost of removal of building 9,800 1-May Partial payment of new construction 60,000 1-May Legal fees paid 3,770 1-Jun Second payment on new construction 40,000 1-Jun Insurance premium 2,280 1-Jun Special tax assessment 4,000 30-Jun General expenses 36,300 1-Jul Final payment on new construction 40,000 31-Dec Asset write-up 43,800 399,950 31-Dec Depreciation-2008 at 1% 4,000 31-Dec Account balance 395,950 The follwing additional info is to beonsidered. 1) To acquire landd and building thecompany paid $80,000 cash and 800 shares of its 8% cumulative preferred stock,par value $100 per share. Fair market value $100 per share. Fair market valueof the stock is $107 per share. 2) Cost of removal of old buildingsamounted to $9,800, and the demolition company retained all materials of thebuilding. 3) Legal fees covered thefollowing: Cost of organiztion 610 Examination of title covering purchase of land 1300 Legal work in connection with constructioncontract 1860 3770 4) Insurance premium covered thebuilding for a 2-year term beginning May 1, 2008 5) The special tax assessment coveredstreet improvements that are permanent in nature 6) General expenses covered thefollowing for the period from Jan 2, 2008 to June 30,2008 Presidents salary 32,100 Plant superintendent covering supervision of newbuidling 4,200 36,300 7) Because of a general increase inconstrucion costs after entering into the building contract, the board of directorsincreased the value of the building $43,800, believing that such an increase was justified toreflect the current market at the time the building was completed. Retained earningswas credited for theis amount 8) Estimated life of building-50years Depreciation for 2008-1% of asset value(1% of $400,000 or $4,000) Instructions: a) prepare entried to reflect correctland, building, and depreciation accounts at 12/31/08 b) show the proper presentaion ofland, building, and depreciation on the balance at 12/31/08Explanation / Answer
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