Question
Ricks Manufacturing Co. was incorporated on 1/2/21 but was unable to begin manufacturing activities until 8/1/21 because new factory facilities were not completed until that
Ricks Manufacturing Co. was incorporated on 1/2/21 but was unable to begin manufacturing activities until 8/1/21 because new factory facilities were not completed until that date. The Land and Buildings account at 12/31/21 per the books was as follows:
Date Item Amount
1/31/21 Land and dilapidated building $200,000
2/28/21 Cost of removing building 4,000
4/1/21 Legal fees 6,000
5/1/21 Fire insurance premium payment 5,400
5/1/21 Special tax assessment for streets 4,500
5/1/21 Partial payment of new building construction 210,000
8/1/21 Final payment on building construction 210,000
8/1/21 General expenses 30,000
12/31/21 Asset write-up 75,000
$744,900
Additional information:
1. To acquire the land and building on 1/31/21, 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 $180.
2. When the old building was removed, Rick paid Kirkland Demolition Co. $4,000, but also received $1,500 from the sale of salvaged material.
3. Legal fees covered the following:
Cost of organization $2,500
Examination of title covering purchase of land 2,000
Legal work in connection with the building construction 1,500
$6,000
4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2021.
5. General expenses covered the following for the period 1/2/21 to 8/1/21.
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 12/31/21 for a separate land account and a separate buildings account. Use separate T-accounts (one for land and one for buildings) labeling all the relevant amounts and disclosing all computations.
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