Spitfire Company was incorporated on January 2, 2016, but was unable to begin manufacturing activities until July 1, 2016, because new factory facilities were not completed until that date.

The Land and Buildings account reported the following items during 2016.

The following additional information is to be considered.
1. To acquire land and building, the company paid €80,000 cash and 800 shares of its 8% preference shares, par value €100 per share. The shares trade in an active market at €117 per share.
2. Cost of removal of old buildings amounted to €9,800, and the demolition company retained all materials of the building.
3. Legal fees covered the following.

4. Insurance premium covered the building for a 2-year term beginning May 1, 2016.
5. The special tax assessment covered street improvements that are permanent in nature.
6. General expenses covered the following for the period from January 2, 2016, to June 30, 2016.

7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building €53,800, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount.
8. Depreciation for 2016—1% of asset value (1% of €400,000, or €4,000).

Instructions

(a) Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2016.

(b) Show the proper presentation of land, buildings, and depreciation on the statement of financial position at December 31, 2016.

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January 31 February 28 Land and building 160,000 Cost of removal of building 9,800 May 1 May 1 Partial payment of new construction 60,000 Legal fees paid 3,770 June 1 Second payment on new construction 40,000 June 1 Insurance premium 2,280 June 1 Special tax assessment 4,000 June 30 General expenses 36,300 July 1 Final payment on new construction 30,000 December 31 Asset write-up 53,800 399,950 December 31 Depreciation-2016 at 1% 4,000 December 31, 2016 Account balance 395,950