Mawn Company bought land and built a warehouse during 2019. 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 Avoidable interest on loan for construction 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 Delinquent property taxes on land paid in 2019 (land was purchased during the year) 2,500 Required: Prepare the correcting entries on December 31, 2019, to properly reclassify the preceding items.
Mawn Company bought land and built a warehouse during 2019. 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 Avoidable interest on loan for construction 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 Delinquent property taxes on land paid in 2019 (land was purchased during the year) 2,500 Required: Prepare the correcting entries on December 31, 2019, to properly reclassify the preceding items.
Chapter14: Property Transact Ions: Capital Gains And Losses, § 1231, And Recapture Provisions
Section: Chapter Questions
Problem 76P
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Mawn Company bought land and built a warehouse during 2019. 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 |
| Avoidable interest on loan for construction | 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 |
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 |
| Delinquent property taxes on land paid in 2019 (land was purchased during the year) | 2,500 |
| Required: | |
| Prepare the correcting entries on December 31, 2019, to properly reclassify the preceding items. |
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