Problem - 1 Part

Gibbs 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. On 12/31/20, the Land and

Building account included the following items:

Date	Item	Amount
1/31/20	Land and old, dilapidated building	$200,000
2/28/20	Cost of removing old building	4,000
4/1/20	Legal fees	3,500
5/1/20	Partial payment of new building construction	150,000
8/1/20	Final payment on building construction	150,000
8/1/20	Fire insurance premium payment	5,400
8/1/20	General expenses	30,000
12/31/20	Write-up to fair value as estimated by management	75,000
Total		$617,900

Additional information:

• To acquire the land and building on 1/31/20, the company paid $100,000 cash and 1,000 shares of its common stock which is very actively traded and had a market value per share of $160 on the date of the acquisition.
• When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000.
• Gibbs received $1,500 from the sale of salvaged material on 3/15/20 and recorded the proceeds as miscellaneous income.
• Legal fees covered the following: Examination of title covering the purchase of land $1,500; Legal work in connection with the building construction 2,000; Total $3,500
• The fire insurance premium covered premiums for a three-year term beginning 8/1/20.
• General expenses covered the following for the period 1/2/20 to 8/1/20: President's salary $20,000, Plant superintendent covering supervision of new building construction 10,000; Total $30,000
• 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, and wrote the land up to its fair market value.

Required

Assess and correct managements errors and determine the proper balances as of 12/31/20 for two

separate accounts: one for Land and one for Building. (NOTE: Just show what the components of

the correct balances should bedo not show journal entries).