Concord Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until...
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Concord 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 $165,900 Feb. 28 Cost of removal of building 9,760 May 1 Partial payment of new construction 60,490 1 Legal fees paid 3,300 June 1 Second payment on new construction 40,010 1 Insurance premium 2,160 1 Special tax assessment 3,860 30 30 General expenses 35,730 July 1 Final payment on new construction 10,140 1 Payment for HVAC (furnace, air conditioning system) 29,600 Dec. 31 Asset write-up to market value 43,660 404,610 31 Depreciation for 2020 at 1% 4,046 Account balance $400,564 1. 2. To acquire land and a building, the company paid $110,860 cash and 570 of its, $7 cumulative preferred shares. The fair value of each share was estimated at $97 per share; however, Concord's shares are not actively traded. The land and building were assessed by an independent, reliable valuator to have a combined fair value of $165,900. The costs for removing the building amounted to $9,760, and the demolition company kept all the salvaged building materials. 3. Legal fees covered the following: Land title search before purchase $910 Legal work in connection with construction contract 2,390 $3,300 4. The insurance premium covered the building for a two-year term beginning May 1, 2020. 5. The special tax assessment by the municipality covered street improvements that are permanent in nature. 6. General expenses covered the following for the period from January 2, 2020, to June 30, 2020: President's salary during construction $31,740 Plant superintendent's wages covering supervision of new building 7. 8. 3,990 $35,730 Because of a general increase in construction costs after entering into the building contract, the board of directors increased the building's value by $43,660. 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 $404,610, or $4,046). 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. Concord expects no residual value at the end of the useful life of HVAC assets. Prepare the entries to reallocate the proper balances into the Land, Buildings, and Accumulated Depreciation accounts at December 31,2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Do not round intermediate calculations. Round final answers to 0 decimal places, eg. 5,275) Date Account Titles and Explanation Dec. 31, 2020 Dec. 31, 2020 (To record correction for initial entries of transactions) (To correct recording of depreciation expense) < Debit Credit Concord 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 $165,900 Feb. 28 Cost of removal of building 9,760 May 1 Partial payment of new construction 60,490 1 Legal fees paid 3,300 June 1 Second payment on new construction 40,010 1 Insurance premium 2,160 1 Special tax assessment 3,860 30 30 General expenses 35,730 July 1 Final payment on new construction 10,140 1 Payment for HVAC (furnace, air conditioning system) 29,600 Dec. 31 Asset write-up to market value 43,660 404,610 31 Depreciation for 2020 at 1% 4,046 Account balance $400,564 1. 2. To acquire land and a building, the company paid $110,860 cash and 570 of its, $7 cumulative preferred shares. The fair value of each share was estimated at $97 per share; however, Concord's shares are not actively traded. The land and building were assessed by an independent, reliable valuator to have a combined fair value of $165,900. The costs for removing the building amounted to $9,760, and the demolition company kept all the salvaged building materials. 3. Legal fees covered the following: Land title search before purchase $910 Legal work in connection with construction contract 2,390 $3,300 4. The insurance premium covered the building for a two-year term beginning May 1, 2020. 5. The special tax assessment by the municipality covered street improvements that are permanent in nature. 6. General expenses covered the following for the period from January 2, 2020, to June 30, 2020: President's salary during construction $31,740 Plant superintendent's wages covering supervision of new building 7. 8. 3,990 $35,730 Because of a general increase in construction costs after entering into the building contract, the board of directors increased the building's value by $43,660. 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 $404,610, or $4,046). 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. Concord expects no residual value at the end of the useful life of HVAC assets. Prepare the entries to reallocate the proper balances into the Land, Buildings, and Accumulated Depreciation accounts at December 31,2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Do not round intermediate calculations. Round final answers to 0 decimal places, eg. 5,275) Date Account Titles and Explanation Dec. 31, 2020 Dec. 31, 2020 (To record correction for initial entries of transactions) (To correct recording of depreciation expense) < Debit Credit
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Related Book For
Intermediate Accounting
ISBN: 978-1119048534
11th Canadian edition Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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