Testbaik PTODiem 139 X Your answer is incorrect. Try again. During 2020, Maria Building Company constructed various assets at a total cost of $12,600,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2020 were $8,347,000. The company had the following debt outstanding at December 31, 2020: 1. 10%, 5-year note to finance construction of various assets, dated January 1, 2020, with interest payable annually on January 1 2. 12%, ten-year bonds issued at par on December 31, 2014, with interest payable annually on December 31 3. 9%, 3-year note payable, dated January 1, 2019, with interest payable annually on January 1 $5,388,000 5,811,000 2,905,500 Compute the amounts of each of the following. 1. Avoidable interest 858,405 2. Total interest to be capitalized during 2020 639,210 Click if you would like to Show Work for this question: Open Show Work

Testbaik PTODiem 139 X Your answer is incorrect. Try again. During 2020, Maria Building Company constructed various assets at a total cost of $12,600,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2020 were $8,347,000. The company had the following debt outstanding at December 31, 2020: 1. 10%, 5-year note to finance construction of various assets, dated January 1, 2020, with interest payable annually on January 1 2. 12%, ten-year bonds issued at par on December 31, 2014, with interest payable annually on December 31 3. 9%, 3-year note payable, dated January 1, 2019, with interest payable annually on January 1 $5,388,000 5,811,000 2,905,500 Compute the amounts of each of the following. 1. Avoidable interest 858,405 2. Total interest to be capitalized during 2020 639,210 Click if you would like to Show Work for this question: Open Show Work

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

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 9P

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Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the assets book value. What amount will be recorded as depreciation expense each year, and what will the book value be at the end of each year after depreciation is recorded?
Q10.9 During 2020, Sunland Company incurred weighted-average accumulated expenditures of $1570000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2020 was a $2040000, 9%, 5-year note payable dated January 1, 2020. What is the amount of interest that should be capitalized by Sunland during 2020? $0. $42300. $183600. $141300.
14. The records for ABC Co. show this data for 2020: • Gross profit on installment sales recorded on the books was P300,000. Gross profit from collections of installment receivables was P220,000. • Life insurance on officers was P3,800. (ABC Company is the beneficiary.) • Machinery was acquired in January for P300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, accelerated depreciation is used and ABC may deduct 14% for 2020. • Interest received on tax exempt Iowa State bonds was P9,000. • The estimated warranty liability related to 2020 sales was P19,600. Repair costs under warranties during 2020 were P13,600. The remainder will be incurred in 2021. For tax purposes. Expenses related to warranty is to be deducted when repair costs are actually rendered. • Pretax financial income is P450,000. The tax rate is 30%. The total income tax expense for the year 2020 would be?
16 On December 31, 2021, Purple Company sold a building, receiving as a consideration a P4,000,000 non-interest bearing note due in three years. The building costs P3,800,000 and the accumulated depreciation was P1,600,000 at the date of sale. The prevailing rate of interest for a note of this type was 12%. How much gain or loss should Purple report on the sale of the asset? Group of answer choices 1,800,000 gain 988,776 loss 647,121 gain 988,776 gain
During 2021, Happy Company constructed asset costing P10,000,000. The weighted average expenditures totaled P6,000,000. To help pay for the construction, P4,400,000 was borrowed at 10% on January 1, 2021. Funds not needed for construction were temporarily invested in short-term securities yielding P90,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was P5,000,000, 10-year, 9% note payable dated January 1, 2020. What amount of interest should be capitalized during 2021?
28 Burger Company constructed its own building which qualifies for interest capitalization. Burger incurred the following cost and had the following outstanding borrowings while the building is under construction. January 1, 2022 P3,000,000 March 31, 2022 2,500,000 June 30, 2022 2,100,000 November 1, 2022 1,275,000 September 1, 2023 5,575,200 Outstanding borrowings: Dated January 1, 2022 - 3,000,000; 7% (specific) Dated January 1, 2022 - 2,000,000; 10% (general) Dated January 1, 2023 - 4,000,000; 8% (general) The construction was completed on December 31, 2023 and ready for its intended use. How much is the initial cost of the building when completed on December 31, 2023 in Burger financial position?
ABC Co. had these loans outstanding for the year 2020: Specific Loan: P1,000,000 at 10% General Loan P20,000,000 at12%. The company began a self-construction of a building on January 1, 2020 and was completed on December 31, 2020. The following expenditures were made during 2020: January 1:P1,000,000 July 1: P2,000,000 November 1: P3,000,000 Total: P6,000,000. How much is the cost of constructed building on December 31, 2020? P6,000,000 P6,250,000 P6,280,000 P6,300,000
E10-18 Calculating Capitalized Interest Kit Company borrows $6 million at 12% on January 1, 2019, specifically for the purpose of financing the construction of a building that is expected to take 18 months to complete. Kit invests the total amount at 11% until it makes payments for the construction project. During the first year of construction, Kit incurs the following expenditures related to this construction project: January 1 $1,000,000 April 1 $1,600,000 October 1 $1,200,000 December 31 $500,000 Required: 1. Compute the amount of interest expense Kit would capitalize related to the construction of the building. 2. Compute the amount of interest revenue Kit would recognize. 3. Assume that Kit uses IFRS. What amount of interest would be capitalized related to the construction of the building?
14. On March 2, 2021, HABIBIYUCK bought an equipment costing P1,200,000. It is the Company’s policy to depreciate long-lived assets using the double declining balance. The equipment had a useful life of 10 years. How much is the carrying value of the above asset at December 31, 2023?
12 The following costs were incurred by ABCDEFGH, Inc.. during 2020: July 1 Organization fees P120,000 July 2 Land site and old building 1,890,000 July 3 Option payments 250,000 July 20 Broker’s fees on property acquired 110,400 July 30 Cost of remodeling the building 60,000 August 30 Salaries of executives 360,000 December 21 Real property taxes 240,000 Additional information: The building acquired had a fair value of P450,000 while the land was currently appraised at P1,800,000 P50,000 of the option money paid were for properties not acquired. The executives had no participation on the remodeling of the building The property taxes were for the 2020 calendar year. How much is the cost of land? Group of answer choices 1,856,320 1,992,320 1,512,000 2,288,000
On January 1, 2020 there is a P300,000 balance in Construction in progress-building account. Included in that balance is P60,000 of interest capitalized in the first two years of the construction. Construction expenditures during the year 2020 were P800,000 which were incurred evenly throughout the entire year. The company has had over P3,000,000 in interest-bearing debt outstanding in 2020, at a weighted average rate of 9%. How much interest is capitalized in 2020?