during 2017 totaled P7,800,000. The entity borrowed P4,000,000 at 7% on January 1, 2017. Funds not needed for construction were temporarily invested in short-term securities, and earned P120,000 interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, P3,000,000, 10-year, 10% note payable dated October 1, 2015, and a 5-year P2,000,000, 8% note payable dated November 2, 2015. What amount of interest should be capitalized on December 31, 2017? A. 574,000 B. 620,000 C. 509,600 D. 629,600

during 2017 totaled P7,800,000. The entity borrowed P4,000,000 at 7% on January 1, 2017. Funds not needed for construction were temporarily invested in short-term securities, and earned P120,000 interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, P3,000,000, 10-year, 10% note payable dated October 1, 2015, and a 5-year P2,000,000, 8% note payable dated November 2, 2015. What amount of interest should be capitalized on December 31, 2017? A. 574,000 B. 620,000 C. 509,600 D. 629,600

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 18E

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During 2017, Reticulated Company constructed a new manufacturing facility at a cost of P30,000,000. The expenditures for this building, which was finished late in 2017, were incurred evenly during the year. The entity had the following loans outstanding at December 31, 2017.  10% note to finance specifically construction of the manufacturing facility, dated January 1, 2017, P10,000,000. Unpaid as of December 31, 2017. Investments were made on the proceeds from this loan and income of P100,000 was realized in 2017.  12%, 20-years bonds payable issued at face value on April 30, 2016, P30,000,000.  8%, 5-years payable, dated March 1, 2016, P10,000,000. What amount of interest is capitalized as cost of the new building? A. 1,550,000 B. 1,450,000 C. 1,400,000 D. 1,500,000
On January 1, 2017, Sheena Company borrowed 2,800,000 at an interest rate of 12% specifically for the construction of a new building.The actual interest cost on this specific borrowing was 336,000 but interest of 14,000 was earned from the temporary investment of the borrowing proceeds.Sheena company also had the following other loans in 2017 for general purposes but the proceeds were used in part for the construction of the building.Principal Interest10% bank loan 4,200,000 420,00012% long term loan 7,000,000 840,000The construction began on January 1, 2017 and was completed on December 31, 2017. The expenditures on the construction were 2,800,000 on Jan. 1, 1,400,000 on March 31 and 4,200,000 on Sept.30.Required: Compute the cost of the new building.
Virginia Corp. has estimated that total depreciation expense for the year ending December 31, 2017 will amount to $1,280,000, total amortization expense for that period will be $420,000, and employee bonuses for the period will total $320,000. In Virginia’s interim income statement for the six months ended June 30, 2017, what is the total amount of expense relating to these three items that should be reported? $1,010,000 $0 $850,000 $505,000
On 1 October 2017, Bush Co. borrowed $6 million for a term of one year, exclusively to financethe construction of a new piece of production equipment. The interest rate on the loan is 6% andis payable on maturity of the loan. The construction commenced on 1 November 2017 but noconstruction took place between 1 December 2017 and 31 January 2018 due to employees takingindustrial action. The asset was available for use on 30 September 2018 having a constructioncost of $6 million.What is the carrying amount of the production equipment in Bush Co’s statement of financialposition as at 30 September 2018?A $5,016,000B $6,270,000C $6,330,000D $6,360,00
Kobe Company began constructing a building for its own use in February 2017. During 2017, Kobe incurred interest of $70,000 on specific construction debt and $15,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2017 was $60,000. Required: What amount of interest should Kobe capitalize? Prepare the journal entry to record payment of the interest. If interest computed on the weighted-average amount of accumulated expenditures for the building during 2017 was instead $90,000, what amount of interest should Kobe capitalize?
On January 1, 2016, Randolf Company signed a contract to have Rory Associates construct a manufacturing facility at a cost of $14,000,000. It was estimated that it would take three years to complete the project. Also on January 1, 2016, to finance the construction cost, Randolf borrowed $14,000,000 payable in seven annual installments of $2,000,000 plus interest at the rate of 9%. During 2016, Randolf made progress payments totaling $5,000,000 under the contract, and the average amount of accumulated expenditures was $3,000,000 for the year. The excess borrowed funds were invested in short-term securities, from which Randolf realized investment income of $330,000. What amount should Randolf report as capitalized interest at December 31, 2016? $510,000 $0 $1,260,000 $270,000
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During 2019, Bing Company constructed its own equipment costing P5,000,000. The weighted average accumulated expenditure on these assets during 2019 was P2,500,000. To help finance the construction, P1, 800,000 was borrowed at 10% on January 1, 2019, and funds not needed for construction were temporarily invested in short-term securities, yielding P45,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a P2,500,000, 10-year, 9% notes payable dated January 1, 2019. What is the amount of interest that should be capitalized by Bing during 2019?
Tamarisk Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,000,000 on January 1, 2017. Tamarisk expected to complete the building by December 31, 2017. Tamarisk’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,350,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,150,000 Avoidable interest is 679,680. Compute the depreciation expense for the year ended December 31, 2018. Tamarisk estimated the facility’s useful life to be 25 years with a salvage value of $900,000. Tamarisk elected to depreciate the facility on a straight-line basis.
Tamarisk Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,000,000 on January 1, 2017. Tamarisk expected to complete the building by December 31, 2017. Tamarisk’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,350,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,150,000 Assume that Tamarisk completed the facility on December 31, 2017, at a total cost of $9,270,000, and the weighted-average amount of accumulated expenditures was $6,120,000.Compute the avoidable interest on this project
Teal Mountain Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,200,000 on January 1, 2017. Teal Mountain expected to complete the building by December 31, 2017. Teal Mountain’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,600,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,380,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,220,000 Assume that Teal Mountain completed the facility on December 31, 2017, at a total cost of $9,476,000, and the weighted-average amount of accumulated expenditures was $6,256,000.Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal…
Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $8,600,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,300,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,290,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,010,000 Assume that Skysong completed the facility on December 31, 2017, at a total cost of $8,858,000, and the weighted-average amount of accumulated expenditures was $5,848,000.A. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal places,…