Question

Monty 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		$168,500
February 28		Cost of removal of building		9,970
May 1		Partial payment of new construction		64,800
May 1		Legal fees paid		4,540
June 1		Second payment on new construction		49,100
June 1		Insurance premium		2,280
June 1		Special tax assessment		4,150
June 30		General expenses		36,675
July 1		Final payment on new construction		27,950
December 31		Asset write-up		56,495
				424,460
December 31		Depreciation-2018 at 1%		(3,743	)
December 31, 2018		Account balance		$420,717

The following additional information is to be considered.

1.		To acquire land and building, the company paid $88,500 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair value of the stock is $111 per share.
2.		Cost of removal of old buildings amounted to $9,970, and the demolition company retained all materials of the building.
3.		Legal fees covered the following.

Cost of organization		$670
Examination of title covering purchase of land		1,520
Legal work in connection with construction contract		2,350
		$4,540

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		$32,272
Plant superintendent’s salary-supervision of new building		4,403
		$36,675

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 $56,495, 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 $374,300, or $3,743).

Question 1:

Prepare entries to reflect correct land, buildings, and depreciation accounts at December 31, 2018

Question 2:

Show the proper presentation of land, buildings, and depreciation on the balance sheet at December 31, 2018

Answer 1