Headlands Limited was attracted to the Town of Mornington by the towns municipal industry commission. Mornington donated a plant site to Headlands, and the provincial government provided $165,000 toward the cost of the new manufacturing facility. The total cost of plant construction came to $387,000, and it was ready for use in early October 2017. Headlands expects the plant to have a useful life of 15 years before it becomes obsolete and is demolished. The company uses the straight-line method of depreciation for buildings and is required to include the plant in Class 6 (10% rate) for tax purposes.

Prepare the entries that are required in 2017 to record the payment to the contractor for the building and the receipt of the provincial government assistance. Assume that the company treats the assistance as a reduction of the assets cost. Also prepare any adjusting entries that are needed at the companys year ends, December 31, 2017 and 2018.

No. Account Titles and Explanation Debit Credit 1. Buildings 387000 Cash 387000 (To record the cost of building) 2. Cash 165000 165000 (To record the amount received from the government) 3. (To record depreciation expense for 2017) 4