Zach Co Ltd Additional Info
I Ii Insurance Covered the Building for a One-Year Term Beginning

question 26

Essay

Zach Co. Ltd. was incorporated on January 2, 2021, but was unable to begin their manufacturing operations immediately. The new factory facilities became available for use on July 1, 2021. During the start-up period, the company provisionally used a "Land and Factory Building" account to record the following transactions, in chronological order:
$$\begin{array} { | l | l | r | } \hline \text { Tan 31 } & \text { Purchase of land and building } & \$ 410,000 \\\hline \text { Feb 19 } & \text { Cost of removing existing building } & 7,000 \\\hline \text { Mar 15 } & \text { Proceeds from sale of scrap material from } & ( 1,500 ) \\& \text { demolition } & \\\hline \text { Mar 15 } & \text { Partial payment on new construction } &80,000 \\\hline \text { Mar 15 } & \text { Legal fees paid (see note (i) below) } & 3,200 \\\hline \text { Apr 1 } & \text { Second payment on new construction } &80,000\\\hline \text { Tun 3 } & \text { Insurance premium (ii) } & 4,200 \\\hline \text { Jun 20 } & \text { Special tax assessment (iii) } &5,000 \\\hline \text { Jul 3 } & \text { General expenses (iv) } & 38,000 \\\hline \text { Dec 31 } & \text { Final payment on new construction } &65,000 \\\hline \text { Dec 31 } & \text { Asset write-up (v) } & \underline{23,000} \\\hline & { \text { Subtotal } } & 713,900 \\\hline \text { Dec 31 } & \text { Less depreciation for 2021 (vi) } & \underline{(17,500)} \\\hline & \text { Account Balance } & \$696,400\\\hline\end{array}$$ Additional info
i. Legal fees of $3,200 covered the following:
$$\begin{array} { | l | r | } \hline \text { Cost of incorporating the company } & \$ 600 \\\hline \text { Examination of title covering purchase of land } & 1,100 \\\hline \text { Legal work in connection with construction contract } & 1,500 \\\hline\end{array}$$ ii. Insurance covered the building for a one-year term beginning April 1, 2021.
iii. The special tax assessment covered repaving the street in front of the building.
iv. General expenses covered the following for the period January 2, 2021 to June 30, 2021.
$\begin{array}{llcc} \text { President's salary} &\$34,000 \\ \text { Plant superintendent covering supervision of new building} &4,000\\\end{array}$
v. The board of directors increased the value of the building by $23,000, 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.
vi. Engineers estimate the useful life of the building to be 40 years. The company believes that the declining balance method at a 5% rate is appropriate. The company's policy for new PPE is to depreciate the assets according to the time available for use in the fiscal year, rounded to the closest month.
Required:
Prepare entries to reflect correct land, factory building, and accumulated depreciation accounts at December 31, 2021. Round values to the nearest dollar, if necessary.

---

Definitions:

Standard Deviation

A quantitative assessment of how much data points diverge from the average value in a series.

Mean Weight

The average weight calculated by summing all the weights in a dataset and dividing by the number of observations.

Confidence Interval

A confidence interval is a range of values, derived from sample statistics, that is believed, with a certain level of confidence, to contain the true value of a population parameter.

Undergraduate Students

Students pursuing their first cycle of higher education, typically leading to a bachelor's degree.