On December 31, 2019, Ayayai Inc. borrowed $3,720,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $446,400; June 1, $744,000; July 1, $1,860,000; December 1, $1,860,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,960,000 6-year, 11% note, dated December 31, 2017, interest payable annually $1,984,000 2. March 1, 2020, expenditure included land costs of $186,000 3. Interest revenue earned in 2020 $60,760 (a) Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building.

Testbank Multiple Choice Question 71

A company issues $25800000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on June 30 and December 31. The proceeds from the bonds are $25357304. Using effective-interest amortization, how much interest expense will be recognized in 2020?

Testbank Multiple Choice Question 72

A company issues $24950000, 6.6%, 20-year bonds to yield 7% on January 1, 2020. Interest is paid on June 30 and December 31. The proceeds from the bonds are $23884381. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2020 balance sheet? (Round answer to 0 decimal place, e.g. 52.)

Sheridan Corp. has a deferred tax asset account with a balance of $74,440 at the end of 2019 due to a single cumulative temporary difference of $372,200. At the end of 2020, this same temporary difference has increased to a cumulative amount of $450,400. Taxable income for 2020 is $757,900. The tax rate is 20% for all years. At the end of 2019, Sheridan Corp. had a valuation account related to its deferred tax asset of $44,800.

(a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that the deferred tax asset will be realized in full.

(b) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that none of the deferred tax asset will be realized.

On January 1, 2020, Sheridan Company purchased 11% bonds, having a maturity value of $301,000 for $324,415.24. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheridan Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

Metlock Company purchased machinery on January 1, 2020, for $88,000. The machinery is estimated to have a salvage value of $8,800 after a useful life of 8 years.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

Compute 2020 depreciation expense using the double-declining-balance method.

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New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

Compute 2020 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2020. (Round answer to 0 decimal places, e.g. 5,125.)

The financial year of your audit client Pickles Ltd ended on 31 December 2019. Your audit report was signed on 20 February 2020 and the financial statements were issued on 5 March 2020.

Each of the following independent events, which the auditors have discovered after the end of the financial year, have a material effect on the financial statements:

1. 14 February 2020

   You found that the audit client had lost a court case for breaching a contract with a supplier. The litigation started on 2 February 2019. The company is required to pay $45,000 damages to the supplier.

2. 27 February 2020
   Pickles Ltd announced that it is making a takeover offer for another company.

Required:

For each of the two events above, explain the auditor’s responsibilities and the auditor’s appropriate course of action.

Sheffield Company reports pretax financial income of $76,500 for 2020. The following items cause taxable income to be different than pretax financial income.

1. Depreciation on the tax return is greater than depreciation on the income statement by $15,700.

2. Rent collected on the tax return is greater than rent recognized on the income statement by $23,400.

3. Fines for pollution appear as an expense of $10,500 on the income statement. Sheffield’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.

Below is the cost information for June and July, 2020.

The production manager informs you that the Beginning Work in Progress  (July 1) was 90% complete as to direct materials and 75% complete as to conversion costs. He also estimates that the Ending Work in Progress  (July 31) is 50% complete as to materials and 35% complete as to conversion costs.

Use the Five-Step Process for assigning costs. Spartans Inc uses the weighted average method for assigning costs. Clearly label and explain each step. Show all calculations.

1. What is the nominal GDP in 2019?

2. What is the nominal GDP in 2020?

3. Assuming 2019 is the base year, calculate the price index for 2020. ROUNDING UP TO TWO DECIMAL POINTS. For Example, 2.136986 is rounded up to 2.14.

4. What is the real GDP in 2020?

5. What is the real rate of growth of GDP from 2019 to 2020?

6.  Assuming the marginal propensity to consume (MPC) is 0.60 and the equilibrium GDP (Ye) is $5,000, calculate government multiplier. following:

In early 2019, Bridge Company entered into a long term contract to construct a bridge for Greensville County for $10 million. The bridge will take three years to complete. In 2019, Bridge spent $2.8 million on the project, recognized $3.5 million in revenue and $.7 million in profit. In 2020, Bridge spent $4.2 million on the project, recognized $3.8 million in revenue and a $.4 million loss. Bridge billed Greensville $3.0 million in 2019 and $4.5 million in 2020. Greensville paid Bridge $2.6 million in 2019 and $4.3 million in 2020. Bridge Company recognizes revenue on all contracts over time, as the project is being completed by using the cost to cost approach. When preparing the December 31, 2019 and the December 31, 2020 balance sheets what would Bridge report in regards to this contract?