Question

Sarasota 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 February 28 May 1 May 1 June 1 June 1 June 1 June 30 July 1 December 31 Land and building Cost of removal of building Partial payment of new construction Legal fees paid Second payment on new construction Insurance premium Special tax assessment General expenses Final payment on new construction Asset write-up $168,300 9,845 63,690 4,580 46,500 2,280 4,170 35,893 29,880 59,036 424,174 (4,038) $420,136 December 31 December 31, 2018 Account balance The following additional information is to be considered 1. To acquire land and building, the company paid $88,300 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair Depreciation-2018 at 196 value of the stock is $128 per share 2. Cost of removal of old buildings amounted to $9,845, and the demolition company retained all materials of the building 3. Legal fees covered the following

Answer 1

1.

Land & Building A/c/ Dr. $ 145,900

Loss on issue of shares A/c Dr. $22,400

Cash A/c Cr. $88,300

8% Cumulative Preferred stock Cr. $80,000

2.

Legal fees paid A/c Dr. $3,870

Land & Building A/c Cr. $3,870

3.

Insurance Premium A/c Dr. $760

Land & Building A/c Cr. $760

(2280/24*8)

4.

General Expense A/c Cr. $4211

Land & Building A/c Cr. $4211

5.

Revaluation of Land & Building A/c Dr. $59,036

Retained Earnings A/c Cr. $ 59,036

6.

Depreciation A/c Dr. $ 4,038

Land & Building A/c Cr. $ 4,038

------------------------------------------------------------------------------------

Presentation of Land & Building in Balance Sheet

Land & Buildings $ 324,515

Less : Depreciation $ 4038

--------------

$ 320,477

----------------