A311 Final Exam Review Problem Set Solutions

3049 Words Apr 7th, 2015 13 Pages
A311: Final Exam Review
Chapter 10

1. Interest Capitalization

Delmar Corporation borrowed \$200,000 at 12% interest from state Bank on January 1, 2013, for the specific purpose of constructing special-purpose equipment to be used in its operations. Construction on the equipment began on 1/1/13, and the following expenditures were made prior to the project’s completion on 12/31/13:

Expenditures Made in 2013
January 1
\$100,000
April 30
150,000
November 1
300,000
December 31
100,000
Total Expenditures
\$650,000

Other general debt existing on 1/1/13, and issued in 2012 at par was: \$500,000, 14%, 10-year bonds payable \$300,000, 10%, 5-year note payable

Instructions: Determine the amount of interest to be capitalized, and provide all of
The exchange lacks commercial substance. Provide the journal entry for Peg Company.
Computation of Gain:
FV of vans exchanged \$ 66,000
BV of vans exchanged 52,000
Total Gain \$ 14,000

15000 x \$14,000 =
\$3,182 gain recognized
(15,000 + 51,000)

Cash 15,000 (given)
Caravan Vans 40,182 (plug!)
AD 23,000 (given) Freestar Vans 75,000 (given) Gain on Disposal of Vans 3,182

Note that if the ratio applied to the \$14,000 above were to exceed 25%, then Peg would have recognized the entire gain.

Chapter 11

3. Depreciation Methods

The Grant-Horace Company purchased a new machine on April 1, 2013, for \$48,000. The machine is expected to have a life of five years and a residual value of \$3,000. The company's fiscal year ends on December 31.
Required:
1. Determine the appropriate amount of depreciation for 2013 and 2014 applying each of the following methods:

Year Straight-line SYD DDB 2013 2014

Computations:

Year Straight-line SYD DDB 2013 \$6,750 \$11,250 \$14,400 2014 9,000 12,750 13,440

Computations:
Straight line:

(\$48,000 - 3,000) -------------------------- = \$9,000 per year x 9/12 for 2011 = \$6,750 5 years

SYD:
2013: \$45,000 x 5/15 = \$15,000 x 9/12 = \$11,250

2014: \$45,000 x 5/15 = \$15,000 x 3/12 = \$ 3,750 + 45,000 x 4/15 = \$12,000 x 9/12 = 9,000 Total 2014 depreciation \$12,750

DDB:
2013: \$48,000 x 40%* = \$19,200 x 9/12 = \$14,400

2014: (\$48,000 - 14,400) x