On December 31, 2018, Inc. had a $1,900,000 note payable outstanding, due July 31, 2019. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. In February 2019, L completed a $3,400,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2019. On March 13, 2019, L issued its 2018 financial statement. What amount of the note payable should L include in the current liabilities section of its December 31, 2018 balance sheet?
Multiple Choice
$3400,000.
$1,360,000.
$1,900,000.
$0
In: Accounting
The following situations are independent of each other and related to the activities and events of Global Berhad in the year 2018. The financial year end for the company is 31 December. (i) In the past, the company expensed borrowing costs on construction of its factory. The company has changed its policy this year and now capitalises as it is incurred. In 2017 accounts, borrowing costs expensed was RM2,500,000 and this year’s borrowing costs incurred was RM3,800,000. The factory is still under construction. (ii) A posting errors has been found in the accounts for the year 2017 whereby RM200,000 proceed from the sales of two delivery trucks has been credited to sales.
Required: For each situation, identify the type of accounting
changes and discuss the proper accounting treatment.
In: Accounting
Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,032,200 on December 31. Wildhorse Company borrowed $1,016,400 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,206,100 note payable and an 10%, 4-year, $3,702,000 note payable. Compute avoidable interest for Wildhorse Company. Use the weighted-average interest rate for interest capitalization purposes. (Round percentages to 2 decimal places, e.g. 2.51% and final answer to 0 decimal places, e.g. 5,275.)
In: Accounting
Coronado Company is constructing a building. Construction began
on February 1 and was completed on December 31. Expenditures were
$1,872,000 on March 1, $1,272,000 on June 1, and $3,046,500 on
December 31.
Coronado Company borrowed $1,007,900 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, $2,397,800 note
payable and an 10%, 4-year, $3,714,900 note payable. Compute
avoidable interest for Coronado Company. Use the weighted-average
interest rate for interest capitalization purposes.
(Round percentages to 2 decimal places, e.g. 2.51% and
final answer to 0 decimal places, e.g. 5,275.)
In: Accounting
Frank operates a construction business in Dallas, Texas. On May 1, 2020, Frank purchased a warehouse for his business. The warehouse cost $1,500,000 ($500,000 for land and $1,000,000 for improvements). In November 2020, Frank purchased the following business property: equipment for $100,000, light-duty truck for $50,000, and office furniture for $50,000. Please calculate Frank’s 2020 depreciation deductions. You can ignore bonus depreciation and Section 179. Be sure to explain your calculations fully.
What income would Frank report if he decided to sell the warehouse and equipment on January 1, 2022 so he could upgrade the business? Assume he could sell the warehouse for $1,500,000 and the equipment for $190,000 ($95,000 for equipment, $47,500 for truck, and $47,500 for office furniture). Be sure to fully explain your answer.
In: Accounting
. Belton Concrete Company pours concrete slabs for single-family dwellings. Clint construction Company, which operates outside Belton’s normal sales territory, asks Belton to pour 200 slabs for Clint’s new development of homes. Belton has the capacity to build 2,400 slabs and is presently working on 2,000 of them. Clint explains that she is willing to pay only $2,200 per slab.
Belton’s costs when it produces 1,500 units are given as follows:
Direct Material Cost $ 2.400.000
Direct Labor 1.200.000
Facility Level Manufacturing Overhead 600.000
Belton estimates 5% increase in “Facility Level Manufacturing Overhead” if it accepts the special order.
Required: Should Belton accept or reject the special order to pour 200 slabs for $2,000 each? Support your answer with appropriate computations.
In: Accounting
A specialty concrete mixer used in construction was purchased for $290,000 7 years ago. It is MACRS-GDS 5-year property. Its annual O&M costs are $80,000. At the end of an 8-year planning horizon, the mixer will have a salvage value of $6,500. If the mixer is replaced, a new mixer will require an initial investment of $375,000, and at the end of the 8-year planning horizon, the new mixer will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Use an EUAC measure, a tax rate of 40 percent, and an after-tax MARR of 9 percent to perform an after-tax analysis to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $55,000.
In: Finance
Question Traverse County needs a new county government building that would cost $10 million. The politicians feel that voters will not approve a municipal bond issue to fund the building because it would increase taxes. They opt to have a state bank issue $10 million of tax-exempt securities to pay for the building construction. The county then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval.
Required
1. Do you think the actions of the politicians and the bankers in this situation are ethical?
2. In terms of risk, how do the tax-exempt securities used to pay for the building compare to a conventional municipal bond issued by Traverse County
In: Accounting
On July 1, 2011, Apache Company sold a parcel of undeveloped land to a construction company for $3,000,000. The book value of the land on Apache's books was $1,200,000. Terms of the sale required a down payment of $150,000 and 19 annual payments of $150,000 plus interest at an appropriate interest rate due on each July 1 beginning in 2012. Apache has no significant obligations to perform services after the sale.
Requirements:
a. How much gross profit will Apache recognize in both 2011 and 2012 assuming point of delivery profit recognition?
b. How much gross profit will Apache recognize in both 2011 and 2012 applying the installment sales method?
c. How much gross profit will Apache recognize in both 2011 and 2012 applying the cost recovery method?
In: Accounting
During 2020, Susan 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 $8,138,000. 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 | $5,452,000 | ||
| 2. | 12%, ten-year bonds issued at par on December 31, 2014, with interest payable annually on December 31 | 5,946,000 | ||
| 3. | 9%, 3-year note payable, dated January 1, 2019, with interest payable annually on January 1 | 2,973,000 |
Compute the amounts of each of the following.
| 1. | Avoidable interest | $ | |
| 2. | Total interest to be capitalized during 2020 | $ |
In: Accounting