Blago Wholesale Company began operations on January 1, 2017, and uses the average cost method in costing its inventory. Management is contemplating a change to the FIFO method in 2018 and is interested in determining how such a change will affect net income. Accordingly, the following information has been developed:
| 2017 | 2018 | ||||||||||
| Final inventory: | |||||||||||
| Average cost | $ | 150,000 | $ | 255,000 | |||||||
| FIFO | 160,000 | 270,000 | |||||||||
Condensed income statements for Blago Wholesale appear below:
| 2017 | 2018 | ||||||||||
| Sales | $ | 1,000,000 | $ | 1,200,000 | |||||||
| Cost of goods sold | 600,000 | 720,000 | |||||||||
| Gross profit | 400,000 | 480,000 | |||||||||
| Selling, general, and administrative | 250,000 | 275,000 | |||||||||
| Net income | $ | 150,000 | $ | 205,000 | |||||||
Required:
Based on this information, what would 2018 net income be after the change to the FIFO method? Ignore any income tax effects of this change in accounting method.
Sales for 2017 and 2018?
Cost of Goods Sold for 2017 and 2018?
Gross Profit for 2017 and 2018?
Selling, general, and administrative for 2017 and 2018?
Net income for 2017 and 2018?
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 1,710,000 March 1, 2018 1,320,000 June 30, 2018 1,520,000 October 1, 2018 1,320,000 January 31, 2019 378,000 April 30, 2019 711,000 August 31, 2019 1,008,000 On January 1, 2018, the company obtained a $4,200,000 construction loan with a 16% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 12% and 14%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2018 and 2019 using the specific interest method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018,
the Mason Manufacturing Company began construction of a building to
be used as its office headquarters. The building was completed on
September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,180,000 | |
| March 1, 2018 | 660,000 | ||
| June 30, 2018 | 860,000 | ||
| October 1, 2018 | 660,000 | ||
| January 31, 2019 | 279,000 | ||
| April 30, 2019 | 612,000 | ||
| August 31, 2019 | 909,000 | ||
On January 1, 2018, the company obtained a $3,100,000 construction
loan with a 12% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $4,000,000 and $6,000,000 with interest rates of
8% and 10%, respectively. Both notes were outstanding during all of
2018 and 2019. Interest is paid annually on all debt. The company’s
fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the specific interest
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,050,000 | |
| March 1, 2018 | 870,000 | ||
| June 30, 2018 | 390,000 | ||
| October 1, 2018 | 690,000 | ||
| January 31, 2019 | 675,000 | ||
| April 30, 2019 | 990,000 | ||
| August 31, 2019 | 1,710,000 | ||
On January 1, 2018, the company obtained a $3 million construction
loan with a 14% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $4,900,000 and $6,900,000 with interest rates of
5% and 7%, respectively. Both notes were outstanding during all of
2018 and 2019. Interest is paid annually on all debt. The company’s
fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the weighted-average
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,200,000 | |
| March 1, 2018 | 900,000 | ||
| June 30, 2018 | 1,100,000 | ||
| October 1, 2018 | 900,000 | ||
| January 31, 2019 | 315,000 | ||
| April 30, 2019 | 648,000 | ||
| August 31, 2019 | 945,000 | ||
On January 1, 2018, the company obtained a $3,500,000 construction
loan with a 12% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $3,000,000 and $7,000,000 with interest rates of
8% and 10%, respectively. Both notes were outstanding during all of
2018 and 2019. Interest is paid annually on all debt. The company’s
fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the specific interest
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,420,000 | |
| March 1, 2018 | 1,140,000 | ||
| June 30, 2018 | 1,340,000 | ||
| October 1, 2018 | 1,140,000 | ||
| January 31, 2019 | 351,000 | ||
| April 30, 2019 | 684,000 | ||
| August 31, 2019 | 981,000 |
On January 1, 2018, the company obtained a $3,900,000 construction loan with a 12% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $6,000,000 and $9,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the specific interest
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 1,300,000 March 1, 2018 720,000 June 30, 2018 340,000 October 1, 2018 640,000 January 31, 2019 450,000 April 30, 2019 765,000 August 31, 2019 1,260,000 On January 1, 2018, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $4,400,000 and $6,400,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2018 and 2019 using the weighted-average method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018,
the Mason Manufacturing Company began construction of a building to
be used as its office headquarters. The building was completed on
September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,200,000 | |
| March 1, 2018 | 660,000 | ||
| June 30, 2018 | 520,000 | ||
| October 1, 2018 | 620,000 | ||
| January 31, 2019 | 360,000 | ||
| April 30, 2019 | 675,000 | ||
| August 31, 2019 | 1,080,000 | ||
On January 1, 2018, the company obtained a $3 million construction
loan with a 11% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $4,200,000 and $6,200,000 with interest rates of
6% and 8%, respectively. Both notes were outstanding during all of
2018 and 2019. Interest is paid annually on all debt. The company’s
fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the weighted-average
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018,
the Mason Manufacturing Company began construction of a building to
be used as its office headquarters. The building was completed on
September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,940,000 | |
| March 1, 2018 | 1,680,000 | ||
| June 30, 2018 | 1,880,000 | ||
| October 1, 2018 | 1,680,000 | ||
| January 31, 2019 | 432,000 | ||
| April 30, 2019 | 765,000 | ||
| August 31, 2019 | 1,062,000 | ||
On January 1, 2018, the company obtained a $4,800,000 construction
loan with a 14% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $3,000,000 and $7,000,000 with interest rates of
6% and 10%, respectively. Both notes were outstanding during all of
2018 and 2019. Interest is paid annually on all debt. The company’s
fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the specific interest
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting
On January 1, 2018, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2019.
Expenditures on the project were as follows:
| January 1, 2018 | $ | 1,820,000 | |
| March 1, 2018 | 1,440,000 | ||
| June 30, 2018 | 1,640,000 | ||
| October 1, 2018 | 1,440,000 | ||
| January 31, 2019 | 396,000 | ||
| April 30, 2019 | 729,000 | ||
| August 31, 2019 | 1,026,000 | ||
On January 1, 2018, the company obtained a $4,400,000 construction
loan with a 14% interest rate. The loan was outstanding all of 2018
and 2019. The company’s other interest-bearing debt included two
long-term notes of $2,000,000 and $8,000,000 with interest rates of
10% and 12%, respectively. Both notes were outstanding during all
of 2018 and 2019. Interest is paid annually on all debt. The
company’s fiscal year-end is December 31.
Required:
1. Calculate the amount of interest that Mason
should capitalize in 2018 and 2019 using the specific interest
method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that
will appear in the 2018 and 2019 income statements.
In: Accounting