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Intermediate Accounting - Homework (10pts) Due date: May 17, before class. You must show all calculations for calculation questions). During 2015,...
1. During 2015, Barden Building Company constructed various assets at a total cost of $8,400,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2015 were $5,600,000. The company had the following debt outstanding at December 31, 2015:
1. 10%, 5-year note to finance construction of various assets,
dated January 1, 2015, with interest payable annually on January 1 $3,600,000
2. 12%, ten-year bonds issued at par on December 31, 2009, with interest
payable annually on December 31 4,000,000
3. 9%, 3-year note payable, dated January 1, 2014, with interest payable
annually on January 1 2,000,000
Instructions
Compute the amounts of each of the following (show computations).
(a) Avoidable interest
(b) Total interest to be capitalized during 2015.
2. On January 2, 2015, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2016. Expenditures for the construction were as follows:January 2, 2015$200,000September 1, 2015600,000December 31, 2015600,000March 31, 2016600,000September 30, 2016400,000Indian River Groves borrowed $1,100,000 on a construction loan at 12% interest on January 2, 2015. This loan was outstanding during the construction period. The company also had $4,000,000 in 9% bonds outstanding in 2015 and 2016.Instructions(a) What were the weighted-average accumulated expenditures for 2015?(b) What were the interest capitalized for 2015?(c) What were the weighted-average accumulated expenditures for 2016 by the end of the construction period?(d) What were the interest capitalized for 2016 was
3. On July 31, 2015, Bismarck Company engaged Duval Tooling Company to construct a special-purpose piece of factory machinery. Construction began immediately and was completed on November 1, 2015. To help finance construction, on July 31 Bismarck issued a $400,000, 3-year, 12% note payable at Wellington National Bank, on which interest is payable each July 31. $300,000 of the proceeds of the note was paid to Duval on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Bismarck made a final $100,000 payment to Duval. Other than the note to Wellington, Bismarck’s only outstanding liability at December 31, 2015, is a $30,000, 8%, 6-year note payable, dated January 1, 2012, on which interest is payable each December 31.Intsructions:(a) Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2015. (Round all computations to the nearest dollar.)(b) Prepare the journal entries needed on the books of Bismarck Company at each of the following dates.(1) July 31, 2015.(2) November 1, 2015.(3) December 31, 2015.4. Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained:Hager's Land Shaw's LandCost and book value $192,000 $120,000Fair value based upon appraisal 220,000 210,000The exchange was made, and based on the difference in appraised fair values, Shaw paid $10,000 to Hager. The exchange has commercial substance.Instructions:(a) Calculate the gain that Hager should recognize on this exchange.(b) Calculate the new land cost to be recorded by Hager.(c) Calculate the new land cost to be recorded by Shaw.
5. A machine cost $80,000, has annual depreciation expense of $16,000, and has accumulated depreciation of $40,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of $32,000, it is exchanged for a similar machine with a fair value of $96,000 and the proper amount of cash is paid. The exchange lacked commercial substance.Instructions:(a) Prepare all entries that are necessary at April 1, 2015.6. Beeman Company exchanged machinery with an appraised value (fair value) of $1,755,000, a recorded cost of $2,700,000 and Accumulated Depreciation of $1,350,000 with Lacey Corporation for machinery Lacey owns. The machinery has an appraised value of $1,695,000, a recorded cost of $3,240,000, and Accumulated Depreciation of $1,782,000. Lacey also gave Beeman $60,000 in the exchange. Assume depreciation has already been updated.Instructions:(a) Prepare the entries on both companies' books assuming that the exchange had commercial substance.(b) Prepare the entries on both companies' books assuming that the exchange lacked commercial substance.7. Trevi Company purchased a delivery truck for $30,000 cash on January 1, 2017. The truck has an expected residual value of $6,000 and has an estimated useful life of 5 years. The company sold the truck for $20,000 cash on April 1, 2019. The Company prepare financial statements at December 31.Instruction:(a) Assume that the company uses the double-declining-balance method (twice the straight-line rate). Prepare all necessary journal entries for 2017 (write the date of each entry).(b) Assume that the company uses the straight-line method. Prepare all necessary journal entries for 2019. (write the date of each entry)
