In early February 2023, Ayayai Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2023 expenditures relate to the addition: Feb. 1 Payment #1 to contractor $111,000 Mar. 1 Payment to architect 24,000 July 1 Payment #2 to contractor 56,100 Dec. 1 Payment #3 to contractor 177,000 Dec. 31 Asset carrying amount $368,100 On February 1, Ayayai issued a $102,000, three-year note payable at a rate of 12% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2023 8%, 15-year bonds, issued May 1, 2008, matured May 1, 2023 8%, 10-year bonds, issued June 15, 2017 7%, 12-year bonds, issued May 1, 2023 Principal Amount $297,000 $500,000 $297,000 What amount of interest should be capitalized year ended December 31, 2023, according to IAS 23? (Do not round
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Problem 9-19 On January 1, 2021, Everlast Company had an overdue note payable of $2,000,000 and accrued interest payable of $200,000. On January 1, 2021, the company entered into a restructuring agreement with its creditor. As a result of the agreement, $600,000 of the principal amount is forgiven. Accrued interest is waived. The new note is payable every December 31 with an interest rate of 6%. The new note has a maturity date of December 31, 2023. The entity paid $150,000 as an arrangement fee to the creditor. The present value (PV) of 1 at 10% for 3 periods is 0.75. The PV of an ordinary annuity of 1 at 10% for 3 periods is 2.49. The market rate of interest is 14% and the PV of 1 at 14% for 3 periods is 0.675 and the PV of an ordinary annuity of 1 at 14% for 3 periods is 2.32. At what amount should the new note be initially measured? What amount of gain on extinguishment should be recognized for 2021? What amount should be reported as interest expense for 2021? What is the carrying amount of the new note payable on December 31, 2021?
Karan D.
On June 1, 2017, ABC Inc., contracted with XYZ Co. to have a distribution center constructed for $6,800,000 on land owned by ABC. ABC made the following payments to XYZ: Date Amount 1-Jul-17 1,200,000 1-Jan-18 1,500,000 1-May-18 1,000,000 1-Jun-18 1,300,000 1-Jul-18 1,800,000 Total payments 6,800,000 When the contract was signed, construction was not expected to be completed until July 1, 2018. Financing of the construction came from two sources. First, ABC took out a one-year loan of $1,000,000 on July 1, 2017 at 7% per annum. Second, ABC had the following general corporate loans outstanding when the construction was in progress: 8%, 6-year note payable of $2,000,000, dated April 1, 2014, with interest payable annually on April 1 10.00%, 10-year bond issue of $3,000,000 sold at par on June 30, 2010, with interest payable annually on June 30 The company’s fiscal year end is June 30 and it follows IFRS. Required: (1) Calculate total weighted-average accumulated expenditures as of June 30, 2018. (2) Calculate total borrowing costs that ABC was required to capitalize for the building under IFRS as of June 30, 2018. (3) Prepare journal entries that ABC would prepare on June 30, 2018 (end of year) to capitalize borrowing costs incurred as of that date for the building
Akash M.
Beautiful, Inc. Balance Sheet December 31, 2018 Cash: $425,621 Accounts Receivable: $1,654,887 Note Receivable: $900,000 Received on 2/1/2018 in return for a large service contract Terms = no interest - 3 payments of 300,000 each Feb Building (net): $1,800,000 Being used for normal operations Construction: $600,000 Weighted Average expenditures 375,000 to add in capitalized interest - started and completed in 2018 Equipment (net): $637,000 No change in use Idle Equipment (net): $107,000 Used equipment dealer quoted $82,000 - original cost $450,000 Broadcast License (net): $1,423,000 10 year remaining life but changes to the broadcast spectrum Company saves on royalties for using the broadcast spectrum on contract Without the broadcast license the royalties would be 126,000 per year Total Assets: $7,547,508 Accounts Payable: $1,067,450 Line of credit for construc: $300,000 Interest rate is 7% Note Payable: $432,370 Borrowed 500,000 on January 1, 2016 with monthly payments for 15 years at 6% Bond payable: $500,000 Sold on January 1, 2010 at face value - interest only payments Coupon rate of 5.5% paid semi annually until January 1, 2030 Total Liabilities: $2,299,820 Paid In Capital: $4,000,000 Retained Earnings: $1,247,688 $7,547,508 Beautiful wants to report all possible amounts using fair value as possible under U.S. GAAP - that means the note and bond payable The current interest rate for Beautiful is 7%. Required: 1. Show all journal entries needed to adjust to fair value where necessary. 2. Show the new balance sheet with fair value as indicated. 3. Show the journal entry to record the trade in of the idle equipment for new equipment (sticker price $105,000) plus payment of $10,000 to the equipment dealer. So you gave up the old equipment and cash for new equipment on March 1, 2019
Sri K.
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Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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