Posted: September 18th, 2017

# Accounting

Gibbs Manufacturing Co. was incorporated on 1/2/14 but was unable to begin manufacturing activities until 8/1/14 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/14 per the books was as follows:

 Date Item Amount 1/31/14 Land and dilapidated building \$200,000 2/28/14 Cost of removing building 3,900 4/01/14 Legal fees 6,190 5/01/14 Fire insurance premium payment 5,112 5/01/14 Special tax assessment for streets 4,780 5/01/14 Partial payment of new building construction 188,900 8/01/14 Final payment on building construction 188,900 8/01/14 General expenses 30,800 12/31/14 Asset write-up 74,000 \$702,582

1. To acquire the land and building on 1/31/14, 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 \$160.
2. When the old building was removed, Gibbs paid Kwik Demolition Co. \$3,900, but also received \$1,460 from the sale of salvaged material.
3. Legal fees covered the following:

 Cost of organization \$2,600 Examination of title covering purchase of land 2,190 Legal work in connection with the building construction 1,400 \$6,190
4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2014.
5. General expenses covered the following for the period 1/2/14 to 8/1/14.

 President’s salary \$20,700 Plant superintendent covering supervision of new building 10,100 \$30,800
6. Because of the rising land costs, the president was sure that the land was worth at least \$74,000 more than what it cost the company.

Determine the proper balances as of 12/31/14 for a separate land account and a separate buildings account.

 Land \$ Buildings \$

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