Mawn Company bought land and built a warehouse during 2019. It improperly debited the following related costs
Question:
Mawn Company bought land and built a warehouse during 2019. It improperly debited the following related costs to an account titled Land and Buildings:
Land purchase ...........................................................................................................$22,000
Demolition of old building ...........................................................................................3,000
Legal fees for land acquisition ....................................................................................1,500
Avoidable interest on loan for construction .............................................................2,900
Building construction ................................................................................................53,000
Assessment by city for sewer connection—city is responsible for maintenance. 1,200
Landscaping (expected to be permanent in nature) ...............................................3,500
Equipment purchased for excavation ......................................................................18,800
Pro rata portion of fixed overhead incurred during construction of building ....15,000
Insurance on building during construction ...............................................................1,000
Profit on construction .................................................................................................12,000
Compensation for injury to construction worker (not covered by the
insurance policy purchased by Mawn) .......................................................................3,000
Modifications to building ordered by building inspectors (due to
poor planning by Mawn) ..............................................................................................7,500
Delinquent property taxes on land paid in 2019 (land was
purchased during the year) .........................................................................................2,500
Required:
Prepare the correcting entries on December 31, 2019, to properly reclassify the preceding items.
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1337788281
3rd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach