AyayaiFurniture Company started construction of a combination office and warehouse building for its own use at an estímated cost of$9,500,000 on January 1, 2020. Ayayai expected to complete the building by December 31, 2020. Ayayai has the following debtobligations outstanding during the construction period.Construction loan- 12% interest, payable semiannually, issued December 31, 2019$ 3,800,000Short-term loan- 10% interest, payable monthly, and principal payable at maturity on May 30, 20212,850,000Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 20241,900,000 Compute the depreciation expense for the year ended December 31, 2021. Ayayai elected to depreciate the building on astraight-line basis and determined that the asset has a useful life of 30 years anda salvage value of $ 570,000. (Round answer to 0decimal places, e.g. 5,275.)Depreciation Expense24

Depreciation is an accounting technique for distributing a tangible or fixed asset's cost over its…

Answered: AyayaiFurniture Company started…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 9MC

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Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. 2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.

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