A widget machine will cost $480,000. The anticipated increase in revenue will be $140,000/year for 5-years. Annual expenses will be $30,000/year for 5-years. The depreciable life is estimated to be 5-years and the salvage value will equal $35,000. Additional inventory necessary to run the machine will be $26,000. Initial training expenses are $20,000. Tax rate equals 40%. A.  Find the discounted payback and convert this into a percentage.

True/False

15) The "Truth in Savings Law" requires banks to advertise their rates on investments such as CDs and savings accounts as annual percentage yields (APY).

16) When quoting rates on loans, the "Truth in Lending Law" requires the bank to state the rate as an APR, effectively understating the true cost of the loan when interest is computed more often than once a year.

Indicate which item could be included in compiling IFRS financial statements:

Select one:

a. Combining debt and equity characteristics of compound financial instruments, but not netting Bonds Payable and Bonds Issue Costs.

b. Using the Completed Contract method for Construction Accounting, but not combining debt and equity characteristics of compound financial instruments.

c. Both separating debt and equity characteristics of compound financial instruments and netting Bonds Payable and Bond Issue Costs.

d. Neither combining debt and equity characteristics of compound financial instruments nor using the Completed Contract method for Construction Accounting.

1. This year, COVID-related disturbances have reduced Englands  net migration to about zero, instead of about 150 000, and construction is forecast to remain low over the short term. What principle of macroeconomics explains why a steady level of net investment in the construction of new offices, houses, retail centres etc. depends significantly on the steady growth of population. [Limit 5 words: 1 mark]

2. Why does it matter for the price of assets that the stock of existing assets is much greater than the flow of newly produced assets? [Limit 20 words: 1 mark]

Skysong Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $3,240,000 on March 1, $2,160,000 on June 1, and $5,400,000 on December 31.

Skysong Company borrowed $1,800,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $3,600,000 note payable and an 11%, 4-year, $6,300,000 note payable. Compute avoidable interest for Skysong Company. Use the weighted-average interest rate for interest capitalization purposes.

svoidable intrest?

Willingham Construction is in the business of building high-priced, custom, single-family homes. The company, headquartered in Anaheim, California, operates throughout the Southern California area. The construction period for the average home built by Willingham is six months, although some homes have taken as long as nine months.

You have just been hired by Willingham as the assistant controller and one of your first tasks is to evaluate the company’s revenue recognition policy. The company presently recognizes revenue upon completion for all of its projects and management is now considering whether revenue recognition over time is appropriate.

Bone Thugs-n-Harmony incurs the expenditures listed below for constructing its corporate headquarters. They took out a $250,000 loan at 8% for the construction. They also have 2 additional loans: 500,000 at 10%, 200,000 at 6%. All loans were outstanding as of 1/1/2019 and were still outstanding when construction was completed on 4/30/2020.

How much interest does Bone Thugs-n-Harmony capitalize in 2019?

Brief Exercise 10-3

Nash Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,088,000 on March 1, $1,236,000 on June 1, and $3,090,260 on December 31.

Nash Company borrowed $1,083,960 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,493,000 note payable and an 10%, 4-year, $3,319,800 note payable. Compute the weighted-average interest rate used for interest capitalization purposes.

weighted average interest rate?

On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:

Dreamworld had the following debt obligations outstanding during both years:

Construction loan, 10%             $500,000

             Long-term note, 12%                      $2,500,000

Required: What would Dreamworld's capitalized interest be in 2019 (assuming interest from 2018 does not compound in 2019)?

1. On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:

   January 1, 2018	$	300,000
   September 1, 2018	$	450,000
   December 31, 2018	$	450,000
   March 31, 2019	$	450,000

   Dreamworld had the following debt obligations outstanding during both years:

   Construction loan, 10%             $500,000

                Long-term note, 12%                      $2,500,000

   Required: What would Dreamworld's capitalized interest be in 2019 (assuming interest from 2018 does not compound in 2019)?