Question

Ayayai 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 $164,600 February 28 Cost of removal of building 9,909 May 1 Partial payment of new construction 62,340 May 1 Legal fees paid 4,460 June 1 Second payment on new construction 44,000 June 1 Insurance premium 2,280 June 1 Special tax assessment 3,780 June 30 General expenses 35,298 July 1 Final payment on new construction 30,160 December 31 Asset write-up 48,889 405,716 December 31 Depreciation-2018 at 1% (4,231 ) December 31, 2018 Account balance $401,485 The following additional information is to be considered. 1. To acquire land and building, the company paid $84,600 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $127 per share. 2. Cost of removal of old buildings amounted to $9,909, and the demolition company retained all materials of the building. 3. Legal fees covered the following. Cost of organization $620 Examination of title covering purchase of land 1,690 Legal work in connection with construction contract 2,150 $4,460 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. President’s salary $31,365 Plant superintendent’s salary-supervision of new building 3,933 $35,298 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 $48,889, 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 $423,100, or $4,231). Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018. (Round answers to 0 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

Answer 1

1)Land and Building Account $164600Debit

To Cash Account Credit $84600

To Preference Share Capital Account Credit $80000

2)Replacement Costs Account Debit $9909

To Cash Account Credit $9909

3)Legal Expenses Account Debit $4460

To Cash Account Credit $4460

4)On May 1

Accrued Insurance premium Account Debit $2280

To Insurance Premium Payable Account Credit $2280

On June 1

Insurance Premium Payable Account Debit $2280

To Cash Account Credit $2280

(5)Improvement Costs Account Debit $3780

To Cash Account Credit $3780

(6)Salary expenses Account Debit $35298

To Cash Account Credit $35298

7)Depriciation Expenses Account Debit $4231

To Building Account Credit $4231

8)Land and Building Account Debit $48889

To Revaluation Surplus Account Credit $48889

May 1

9Partial construction expenses $62340

To Cash Account credit $62340

10)June 1

Construction Expenses Account Debit $44000

To Cash Account Credit $44000

11)July 1

Construction expenses Account Debit $30160

To Cash Account Credit $30160