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In: Accounting

Mawn Company bought land and built a warehouse during 2016. It improperly debited the following related...

Mawn Company bought land and built a warehouse during 2016. It improperly debited the following related costs to an account titled Land and Buildings:

Land purchase $22,000

Demolition of old building $3,000

Legal fees for land acquisition $1,500

Capitalized interest on loan for construction of building $2,900

Building construction $53,000

Assessment by city for sewer connection—city is responsible for maintenance $1,200

Landscaping (expected to be permanent in nature) $3,500

Equipment purchased for excavation $18,800

Pro rata portion of fixed overhead incurred during construction of building $15,000

Insurance on building during construction $1,000

Profit on construction $12,000

Compensation for injury to construction worker (not covered by the insurance policy purchased by Mawn) $3,000

Modifications to building ordered by building inspectors (due to poor planning by Mawn) $7,500

Deliquent property taxes on land paid in 2016 (land was purchased during the year) $2,500

Required: Prepare the correcting entries on December 31, to properly reclassify the preceding items.

Solutions

Expert Solution

Date 31 Dec 2016 particulars Debit $ Credit $
Land 26500
1       Land and buildings 26500
To record Land purchase, Demolition of old building & Legal fees for land acquisition
Building 2900
2     Land and building 29000
Capitalized interest on loan for construction of building
Building 53000
3     Land and buildings 53000
Building construction
Land improvements 1200
4        Land and buildings 1200
Sewer improvement
Land 3500
5      Land and buildings 3500
  
Cost of landscaping
Equipment 18800
6     Land and buildings 18800
Excavation equipment purchase
building 15000
7    Land and buildings 15000
Pro rata portion of fixed overhead incurred during construction of building
8 Building 1000
   Land and buildings 1000
insurance on building during construction
9 Gain on construction 12000
      Land and buildings 12000
Profit on construction
10 Loss due to workers injury 3000
    Land and buildings 3000
compensation for injury to construction worker
11 Loss due to modifications to building 7500
       Land and buildings 7500
Modifications to building ordered by building inspectors
12 Land 2500
   Land and buildings 2500
Deliquent property taxes on land paid in 2016

ekkarill92 answered 3 years ago
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