Problem 10-3

Skysong Company was incorporated on January 2, 2018, but was unable to begin manufacturing activities until July 1, 2018, because new factory facilities were not completed until that date. The Land and Buildings account reported the following items during 2018.

January 31		Land and building		$168,500
February 28		Cost of removal of building		9,877
May 1		Partial payment of new construction		62,570
May 1		Legal fees paid		4,590
June 1		Second payment on new construction		47,700
June 1		Insurance premium		2,280
June 1		Special tax assessment		4,130
June 30		General expenses		35,598
July 1		Final payment on new construction		28,230
December 31		Asset write-up		55,431
				418,906
December 31		Depreciation-2018 at 1%		(3,701	)
December 31, 2018		Account balance		$415,205

The following additional information is to be considered.

1.		To acquire land and building, the company paid $88,500 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $124 per share.
2.		Cost of removal of old buildings amounted to $9,877, and the demolition company retained all materials of the building.
3.		Legal fees covered the following.

Cost of organization		$680
Examination of title covering purchase of land		1,680
Legal work in connection with construction contract		2,230
		$4,590

4.		Insurance premium covered the building for a 2-year term beginning May 1, 2018.
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, 2018, to June 30, 2018.

Presidents salary		$31,503
Plant superintendents salary-supervision of new building		4,095
		$35,598

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 $55,431, 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.		Estimated life of building-50 years. Depreciation for 2018-1% of asset value (1% of $370,100, or $3,701).

Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles and Explanation 1 Land Credit Debit Buildings Retained Earnings Salaries and Wages Expense Prepaid Insurance Organization Expense Insurance Expense Land and Buildings 418906 Paid-in Capital in Excess of Par-Common Stock 2. Land and Buildings Depreciation Expense Accumulated Depreciation-Buildings Show the proper presentation of land, buildings, and depreciation on the balance sheet at December 31, 2018. (Round answers to O decimal places, e.g. 5,275 Skysong Company Balance Sheet December 31, 2018 Property, Plant, and Equipment Land Buildings Less . Depreciation Expense Total Property, Plant and Equipment Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles and Explanation 1 Land Credit Debit Buildings Retained Earnings Salaries and Wages Expense Prepaid Insurance Organization Expense Insurance Expense Land and Buildings 418906 Paid-in Capital in Excess of Par-Common Stock 2. Land and Buildings Depreciation Expense Accumulated Depreciation-Buildings Show the proper presentation of land, buildings, and depreciation on the balance sheet at December 31, 2018. (Round answers to O decimal places, e.g. 5,275 Skysong Company Balance Sheet December 31, 2018 Property, Plant, and Equipment Land Buildings Less . Depreciation Expense Total Property, Plant and Equipment