Easton Manufacturing Co. was incorporated on 1/2/20 but was unable to begin manufacturing activities until 8/1/20 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/20 per the books was as follows:

Date	Item	Amount
1/31/20	Land and dilapidated building	$200,000
2/28/20	Cost of removing building	4,000
4/1/20	Legal Fees	6,000
5/1/20	Fire insurance premium payment	5,400
5/1/20	Special tax assessment for streets	4,500
5/1/20	Partial payment of new building construction	210,000
8/1/20	Final payment on building construction	210,000
8/1/20	General expenses	30,000
12/31/20	Asset write-up	75,000
		Total: $744,900

Additional information:

1. To acquire the land and building on 1/31/20, 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 $180.

2. When the old building was removed, Easton paid Kwik Demolition Co. $4,000, but also received $1,500 from the sale of salvaged material.

3. Legal fees covered the following: cost of organization, $2,500; examination of title covering purchase of land, $2,000 and legal work in connection with the building construction, $1,500.

4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2020.

5. General expenses covered the following for the period 1/2/20 to 8/1/20: President's salary, $20,000 and Plant superintendent covering supervision of new building, $10,000.

6. Because of the rising land costs, the president was sure that the land was worth at least $75,000 more than what it cost the company.

Prepare a schedule to determine the proper balances as of 12/31/20 for the land account and the buildings account. To receive full credit, you must label all the relevant amounts and disclosing all computations.

Answer rating: 100% (QA)

Land Buildings Expense Acquisition cost of land and dilapidated b... View the full answer