In: Accounting
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.
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 | |||