Question

Gibbs Manufacturing Co. purchased a piece of land to build a new factory. The factory building was completed on 8/1/2012. Below is a list of costs incurred with the respective dates.

5	Gibbs Manufacturing Co. purchased a piece of land to build a new factory. The factory building was completed on
	8/1/2012. Below is a list of costs incurred with the respective dates.
	Date	Item				Amount
	1/31/2012	Land and an old dilapidated building				$   240,000
	2/28/2012	Cost of removing old building				4,000
	4/1/2012	Legal fees (see below)				3,500
	5/1/2012	Fire insurance premium payment (see below)				5,400
	5/1/2012	Partial payment of new bu ilding construction				170,000
	8/1/2012	Final payment on building construction				170,000
	8/1/2012	General expenses (see below)				30,000
	12/31/2012	Asset write-up				75,000
						$   697,900
	Additional information:
a)	To acquire the land and building on 1/31/12, the company paid $240,000
	cash.
b)	When the old building was removed, Gibbs paid Kwik Demolition Co.
	$4,000, but also received $1,500 from the sale of salvaged material.
c)	Legal fees covered the following:
	Examination of title covering purchase of land					$      2,000
	Legal work in connection with the building construction					1,500
						$      3,500
d)	The fire insurance premium covered premiums for a three-year term
	beginning, May 1, 2012.
e)	General expenses covered the following for the period 1/2/12 to 8/1/12.
	CEO's salary					$    20,000
	Plant superintendent covering supervision of new building					10,000
						$    30,000
f)	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.
	Instructions
	Determine the proper balances as of 12/31/12 for a separate land account and a separate buildings account.

Answer 1

	Land	Building
Cost of land and dilapidated building	240000
Cost of removing building	4000
Sale proceeds of salvaged material	-1500
Legal fees for title covering purchase of land	2000
Legal fees in connection with building construction		1500
Fire insurance premium ($5400 x 3/36)		450
Partial payment for new building construction		170000
Final payment for new building construction		170000
Plant superintendent covering supervision of new building		10000
Proper balances as of 12/31/12	244500	351950