P10-3 (Classification of Land and Building Costs) Spitfire Company was incorporated on January 2, 2016, but was unable to begin manufacturing activities until July 1, 2016, because new factory facilities were not completed until that date. The Land and Buildings account reported the following items during 2016. January 31 February 28 May 1 May 1 June 1 June 1 June 1 June 30 July 1 December 31 Land and building Cost of removal of building Partial payment of new construction Legal fees paid Second payment on new construction Insurance premium Special tax assessment General expenses Final payment on new construction Asset write-up 160,000 9,800 60,000 3,770 40,000 2,280 4,000 36,300 30,000 53,800 399,950 4,000 395,950 December 31 Depreciation-2016 at 1 % Account balance December 31,2016 The following additional information is to be considered. 1. To acquire land and building, the company paid 80,000 cash and 800 shares of its 8% preference shares, par value 100 per share. The shares trade in an active market at 117 per share. Cost of removal of old buildings amounted to 9,800, and the demolition company retained all materials of the building. 2. 3. Legal l fees covered the following. Cost of organization E 610 1,300 1,860 63,770 of title covering purchase of land Legal work in connection with construction contract 4. Insurance premium covered the building for a 2-year term beginning May 1,2016. 5. The special tax assessment covered street improvements that are permanent in nature. 6. General expenses covered the following for the period from January 2, 2016, to June 30, 2016. President's salary Plant superintendent's salary-supervision of new building 632,100 4,200 636,300 7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building 53,800, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount. 8. Depreciation for 2016-1% of asset value (1% of 400,000, or 4,000). Instructions (a) Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31,2016. (b) Show the proper presentation of land, buildings, and depreciation on the statement of financial position at December 31, 2016