Culver Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $6,000,000 on January 1, 2020. Culver expected to complete the building by December 31, 2020. Culver has the following debt obligations outstanding during the construction period.
| Construction loan-14% interest, payable semiannually, issued December 31, 2019 | $2,400,000 | |
| Short-term loan-12% interest, payable monthly, and principal payable at maturity on May 30, 2021 | 1,680,000 | |
| Long-term loan-13% interest, payable on January 1 of each year. Principal payable on January 1, 2024 | 1,200,000 |
1. Assume that Culver completed the office and warehouse building on December 31, 2020, as planned at a total cost of $6,240,000, and the weighted-average amount of accumulated expenditures was $4,320,000. Compute the avoidable interest on this project.
2. Compute the depreciation expense for the year ended December 31, 2021. Culver elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $360,000.
In: Accounting
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Based on Exercise 18-33 |
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During 2020, Kingbird Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available. |
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| 2020 | 2021 | 2022 | |||||||||||||
| Costs incurred to date | $393,900 | $760,380 | $1,059,000 | ||||||||||||
| Estimated costs to complete | 616,100 | 341,620 | –0– | ||||||||||||
| Billings to date | 299,000 | 905,000 | 1,610,000 | ||||||||||||
| Collections to date | 268,000 | 818,000 | 1,421,000 | ||||||||||||
| 2. Prepare journal entries for all 3 years. |
| 2020 | 2021 | 2022 | |
| Contract Price | $1,610,000 | $1,610,000 | $1,610,000 |
| Cost incurred to date | $393,900 | $760,380 | $1,059,000 |
| Estimated cost yet to be incurred to complete the contract | $616,100 | $341,620 | $0 |
| Total cost | $1,010,000 | $1,102,000 | $1,059,000 |
| % of completion | 39% | 69% | 100% |
| Revenue to date | $627,900 | $1,110,900 | $1,610,000 |
| Revenue previous year | $0 | $627,900 | $1,110,900 |
| Net revenue this year | $627,900 | $483,000 | $499,100 |
| Cost to date | $393,900 | $760,380 | $1,059,000 |
| Cost to date of previous year | $0 | $393,900 | $760,380 |
| Net cost of the year | $393,900 | $366,480 | $298,620 |
| Gross Profit | $234,000 | $116,520 | $200,480 |
In: Accounting
Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity was 20 years, and they have a six percent coupon. Rottweiler used the money to purchase 150 Really Adorable Puppies. The firm hopes to double production of Really Adorable Puppies in the next five to ten years. The company makes all payments on a semiannual basis.
1. What is the value of the bond on February 24, 2020, if the interest rate on comparable debt is 6 percent? What is the current yield? What is the yield to maturity?
2. What is the value of the bond on February 24, 2020, if the interest on comparable debt is 10 percent? What is the current yield? What is the yield to maturity?
3. What is the value of the bond on February 24, 2020, if the interest on comparable debt is 4 percent? What is the current yield? What is the yield to maturity?
4. Draw the time path of value graph (be sure to label all points of interest) of a 6 percent coupon, $1,000 par value bond when interest rates are 4 percent, 6 percent, and 10 percent.
In: Finance
Mooney Ltd. completed the construction of an office building for £2,400,000 on December 31, 2019. The company estimated that the building would have a residual value of £0 and a useful life of 40 years. A more detailed review of the expenditures related to the building indicates that £300,000 of the total cost was used for personal property and £180,000 for land improvements. The personal property has a depreciable life of 5 years and land improvements have a depreciable life of 10 years.
Instructions
a. Compute depreciation expense for 2020 using component depreciation and the straight‐line method.
b. assume a yearly accounting period ending on 31 May 2020. Prepare the adjusting journal entry for depreciation on that date.
c. Prior to the IFRS requirement to depreciate components separately, all of the £2,400,000 may well have been depreciated using the useful life and residual value of the building. Calculate the depreciation expense for the calendar year 2020 under this scenario. Compare this with what you calculated for Instruction a). If management were opportunistic, would they have preferred the result just calculated or the result in a)? Explain why.
In: Accounting
Sweet Construction Company began operations on January 1, 2020. During the year, Sweet Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Sweet estimated that it would take 5 years to complete the facility at a total cost of $4,517,000. The total contract price for construction of the facility is $6,047,000. During the year, Sweet incurred $1,067,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,271,200. Lundquist Corp. was billed and paid 25% of the contract price. Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2020, and the amount to be shown as “costs and recognized profit in excess of billings” or “billings in excess of costs and recognized profit” at December 31, 2020, under each of the following methods.
(a) Completed-contract method.
1.Gross Profit to be recognize
2.Computation of Billings on Uncompleted Contract in
Excess of
Related Costs under Completed-Contract Method
(b) Percentage-of-completion method.
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Computation of Gross Profit to Be
Recognized |
In: Accounting
In 2020, Garage Doors Inc. had sales of $350 million. Operating costs, depreciation and interest were $230 million, $30 million and $10 million respectively. It’s corporate tax rate is 40%. The company reported $40 million in operating current assets and $14 million in operating current liabilities. It also reported net property, plant and equipment of $70 million and Long Term Debt $180 million.
For 2019, net operating working capital was $28 million, net property, plant and equipment was $60 million and Long Term Debt $200 million.
Net investment in operating capital during 2020 was $8 million.
Required:
With respect to 2020:
(a) What was the company’s net income?
(b) What was the company’s NOPAT?
(c) What was the company’s Free Cash Flows from Operations?
(d) What was the gross investment in property, plant and equipment during the year?
(e) What was the company’s Free Cash Flow to the Firm for the year?
(f) What is the company’s Free Cash Flow to Equity for the year?
In: Accounting
The equity accounts of Donald Corporation on January 1, 2020, were as follows.
Share Capital – Preference 8%, cumulative, $50 par,
12,000 share authorized and issued $600,000
Share Capital – Ordinary $1 stated value, 2,200,000 shares authorized,
1,200,000 shares issued and 1,170,000 shares outstanding 1,200,000
Share Premium – Preference 120,000
Share Premium – Ordinary 1,300,000
Retained Earnings 2,000,000
Treasury Shares – Ordinary (30,000 shares) 120,000
During 2020, the company had the following transactions and events pertaining to its equity.
Mar. 1 Issued 35,000 ordinary shares for $175,000.
May. 10 Sold 18,000 treasury shares – ordinary for $90,000.
Aug. 5 Issued 10,000 ordinary shares for a patent valued at $62,000.
Oct. 20 Purchased 1,300 ordinary shares for the treasury at a cost of $7,800.
Dec. 31 Net income for the year was $560,000.
***No dividends were declared during the year.
Required:
a) Journalize the above transactions and closing entry for net income.
b) Prepare the equity section at December 31, 2020.
In: Accounting
Required information
[The following information applies to the questions
displayed below.]
In 2018, the Westgate Construction Company entered into a contract
to construct a road for Santa Clara County for $10,000,000. The
road was completed in 2020. Information related to the contract is
as follows:
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,604,000 | $ | 4,032,000 | $ | 1,940,400 | |||
| Estimated costs to complete as of year-end | 5,796,000 | 1,764,000 | 0 | ||||||
| Billings during the year | 2,040,000 | 4,596,000 | 3,364,000 | ||||||
| Cash collections during the year | 1,820,000 | 4,000,000 | 4,180,000 | ||||||
Westgate recognizes revenue over time according to percentage of
completion.
rev: 09_15_2017_QC_CS-99734
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,604,000 | $ | 3,820,000 | $ | 3,220,000 | |||
| Estimated costs to complete as of year-end | 5,796,000 | 3,120,000 | 0 | ||||||
In: Accounting
Brickell Corporation purchased a new machinery at the beginning of 2020 at a cost of $200,000. The machinery is expected to have a useful life of 10 years and no residual value. The straight-line method of depreciation is used. Adverse economic conditions develop in 2022 that result in a significant decline in demand for Brickell’s products. At December 31, 2022 the company develops the following estimates related to the machinery:
• Expected future cash flows: $150,000
• PV of expected future cash flows: $110,000
• Selling price: $140,000
• Cost of disposal: $14,000
At the end of 2024, Brickell’s management determines that there has been a substantial improvement in economic outlook, resulting in a strengthening of demand for Brickell’s products. The following estimates related to the machinery are developed at December 31, 2024:
• Expected future cash flows: $140,000
• PV of expected future cash flows: $106,000
• Selling price: $100,000
• Cost of disposal: $14,000
Required:
1. Determine the carrying amounts for the machinery reported on the balance sheet at the end of years 2020-2024 and the amounts to be reported in the income statement related to the machinery for years 2020-2024.
In: Accounting
Example #2, On January 1, 2019 a company purchases an automobile for $100,000 by signing a note for the $100,000, with 4% interest rate. The note is to be paid in three equal payments of $36,034.85 at the end of each year beginning December 31, 2019.
Below is the loan reduction schedule (please be sure you understand it)!!!!!!
|
Date |
Beg. Balance |
interest expense |
Cash Payment |
Reduction in Principal |
Principal Balance |
|
2019 |
100,000 |
100,000.00*.04=4,000.00 |
36,034.85 |
36,034.85-4,000.00=32,034.85 |
100,000.00-32,034.85=67,965.15 |
|
2020 |
67,965.15 |
67,965.15*.04=2,718.60 |
36,034.85 |
36,034.85-2,718.60=33,316.25 |
67,965.15-33,316.25=34,648.90 |
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2021 |
34,648.90 |
34,648.90*.04=1,385.95 |
36,034.85 |
36,034.85-1,385.95=34,648.90 |
34,648.90-34,648.90=0 |
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Date |
Account Name |
Debit |
Credit |
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1/1/2019 |
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12/31/2019 |
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Date |
Account Name |
Debit |
Credit |
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12/31/2020 |
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Date |
Account Name |
Debit |
Credit |
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12/31/2021 |
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In: Accounting