ACNT 1371 PRINT UPGRADE
10th Edition
ISBN: 9781260906554
Author: SPICELAND
Publisher: MCGRAW-HILL HIGHER EDUCATION
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On January 1, 2021, LLB Industries borrowed $400,000 from Trust Bank by issuing a two-year, 8% note, with interest payable quarterly.
LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent
was to hedge the risk that general interest rates will decline, causing iPhone USB ue of its debt to increase. The agreement called for the
company to receive payment based on a 8% fixed interest rate on a notional amount of $400,000 and to pay interest based on a
floating interest rate. The contract called for cash settlement of the net interest amount quarterly.
Floating (LIBOR) settlement rates were 8% at January 1, 6% at March 31, and 4% June 30, 2021. The fair values of the swap are quotes
obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below.
Fair value of interest rate swap
Fair value of note payable
January 1
0
$400,000
Required:
1. Calculate the net cash…
On December 31, 2024, Blossom Inc. borrowed $4,380,000 at 12% payable annually to finance the construction of a new building. In
2025, the company made the following expenditures related to this building: March 1, $525,600; June 1, $876,000; July 1,
$2,190,000; December 1, $2,190,000. The building was completed in February 2026. Additional information is provided as follows.
1.
2.
Other debt outstanding:
10-year, 13% bond, December 31, 2018, interest payable annually
6-year, 10% note, dated December 31, 2022, interest payable annually
March 1, 2025, expenditure included land costs of $219,000.
3. Interest revenue of $71,540 earned in 2025.
$5,840,000
2,336,000
Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building.
The amount of interest $
Prepare all of Blossom's journal entries for 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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