Reference no: EM132642966

Question - Gibbs Manufacturing Co. was incorporated on 1/2/19 but was unable to begin manufacturing activities until 8/1/17 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/19 per the books was as follows:

Date	Item	Amount
1/31/19	Land and dilapidated building	$200,000
2/28/19	Cost of removing building	4,000
4/1/19	Legal fees	6,000
5/1/19	Fire insurance premium payment	5,440
5/1/19	Special tax assessment for streets	4,500
5/1/19	Partial payment of new building construction	190,000
8/1/19	Final payment on building construction	190,000
8/1/19	General expenses	30,000
12/31/19	Asset write-up	75,000
		$704,940

Additional information:

1. To acquire the land and building on 1/31/19, 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 $160.

2. When the old building was removed, Gibbs 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 $2,000

Examination of title covering purchase of land 2,000

Legal work in connection with the building construction 1,000

$5,000

4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2019.

5. General expenses covered the following for the period 1/2/19 to 8/1/19.

President's salary $20,000

Plant superintendent covering supervision of new building 10,000

$30,000

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.

Instructions - Determine the proper balances as of 12/31/19 for a separate land account and a separate buildings account. Use separate presentation of accounts (one for land and one for buildings) labeling all the relevant amounts and disclosing all computations.