On December 31 borrowed this question solution general accounting On December 31, 2016, Marin Inc. borrowed $3,900,000 at 12% payableannually to finance the construction of a new building. In 2017, the companymade the following expenditures related to this building: March 1, $468,000;June 1, $780,000; July 1, $1,950,000; December 1, $1,950,000. The building wascompleted in February 2018.Additional information is provided as follows.1. Other debt outstanding10-year, 13% bond, December 31, 2010, interest payableannually$5,200,0006-year, 10% note, dated December 31, 2014, interest payableannually$2,080,0002. March 1, 2017, expenditure included land costs of $195,0003. Interest revenue earned in 2017$63,700Determine the amount of interest to be capitalized in 2017 in relation to theconstruction of the building.

Step 1: Define Capitalized InterestThe accumulated interest amount added to the face value of…

Answered: On December 31, 2016, Marin Inc.…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter17: Business Tax Credits And The Alternative Minimum Tax

Section: Chapter Questions

Problem 11P

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Cole Co. began constructing a building for its own use in January 2016. During 2016, Cole incurred interest of $50,000 on specific construction debt, and $20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2016 was $40,000. What amount of interest should Cole capitalize? a. $20,000 b. $40,000 c. $50,000 d. $70,000
Arcana Company self-constructed an asset for its own use. Construction stated on January 1, 2017 and the asset was completed on December 31, 2017. The company had a two-year, 18% loan of P500,000, specifically obtained to finance the asset construction. Funds not yet needed during the construction were temporarily invested in a short-term debt securities yielding a P10,000 interest revenue. Costs incurred during the year were as follows: January 1 – P400,000 April 1 – P500,000 August 1 – P480,000 December 1 – P180,000 1) What is the capitalized interest added to the cost of the self-constructed asset? A. 90,000 B. 80,000 C. 180,000 D. 0 2) How much is the total cost of the self-constructed asset? A. 1,650,000 B. 1,560,000 C. 1,640,000 D. 1,070,000
On April 1, 2013, Archer Corporation purchased a new machine on a deferred payment basis. A down payment of $6,000 was made and six monthly installments of $4,000 each are to be made beginning on May 1, 2013. The cash equivalent price of the machine was $28,000. Archer incurred and paid installation costs amounting to $500. The amount to be capitalized as the cost of the machine is a. $28,000b. $22,600c. $28,500d. $24,600
Southern Atlantic Distributors began operations in January 2018 and purchased a delivery truck for $40,000.Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2018, 30% in 2019, and 20% in 2020. Pretaxaccounting income for 2018 was $300,000, which includes interest revenue of $40,000 from municipal bonds.The enacted tax rate is 40%.Required:Assuming no differences between accounting income and taxable income other than those described above:1. Prepare the journal entry to record income taxes in 2018.2. What is Southern Atlantic’s 2018 net income?
Braxton Technologies, Inc., constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2016. A&G paid for the conveyor by issuing a $100,000, four-year note that specified 5% interest to be paid on December 31 of each year, and the note is to be repaid at the end of four years. The conveyor was custom-built for A&G, so its cash price was unknown. By comparison with similar transactions it was determined that a reasonable interest rate was 10%. Required: 1. Prepare the journal entry for A&G’s purchase of the conveyor on January 1, 2016. 2. Prepare an amortization schedule for the four-year term of the note. 3. Prepare the journal entry for A&G’s third interest payment on December 31, 2018. 4. If A&G’s note had been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2016, what would be the amount of each installment? 5. Prepare an amortization schedule for the four-year term of…
The following information relates to a company which prepares financial statements to 31st December each year: (a) On 1st January 2017, the company acquired new plant costing Ghs10million. This plant will require a complete overhaul after five years of use, at an estimated cost of Ghs1million. Accordingly, the company wishes to make a provision of Ghs200,000 for plant overhaul costs in its financial statement for the year to 31st December 2017 and then to increase this provision by Ghs200,000 every year for the next four years. This will have the effect of spreading the overhaul costs yearly over the years 2017 to 2021. (b) On 31st December 2017, the company moved from leased premises into new freehold premises. The lease on the old premises will continue for three more years at an annual cost of Ghs100,000. The lease cannot be cancelled and the premises cannot be sublet or used for any other purpose. The company wishes to make a provision of Ghs300,000 in its financial statements for…
Southern Atlantic Distributors began operations in January 2016 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2016, 30% in 2017, and 20% in 2018. Pretax accounting income for 2016 was $300,000, which includes interest revenue of $40,000 from municipal bonds. The enacted tax rate is 40%. Required: Assuming no differences between accounting income and taxable income other than those described above: 1. Prepare the journal entry to record income taxes in 2016. 2. What is Southern Atlantic’s 2016 net income?
Assuming that the effects of interest capitalization are material, calculate the amount ofinterest costs to be capitalized by Matthew Corporation in 2014 in relation to the following events: On January 1, Matthew began construction for a new storage building for its own use. Expenditures incurred evenly throughout the year totaled $900,000. Matthew borrowed $1,000,000 specifically for construction of the storage building at an annual interest rate of 6%. What is the amount of interest that should be capitalized? a. $54,000b. $27,000c. $2,700d. $0 Inventories costing $200,000 were routinely manufactured during the year. Matthew borrowed $200,000 at 8% to finance inventory-related costs. What is the amount of interest that should be capitalized? a. $16,000b. $8,000c. $800d. $0 On September 1, Matthew began construction of a custom-designed machine to the specifications of a customer. As of December 31, $200,000 of materials, labor, and overhead have been assigned to the machine.…
During 2023, Blossom Company constructed various assets at a total cost of $4.10 million. The weighted- average accumulated expenditures on assets qualifying for capitalization of interest during 2023 were $2.80 million. The company had the following debts outstanding at December 31, 2023: 1. 2. 8%, five-year note to finance construction of various assets, dated January 1, 2023, with interest payable annually on January 1 $1,780,000 3. 10%, ten-year bonds issued at par on December 31, 2018, with interest payable annually on December 31 $2,040,000 7%, three-year note payable, dated January 1, 2022, with interest payable annually on January 1 $1,020,000 Calculate the total interest to be capitalized for 2023. Total interest to be capitalized
On April 1, Paine Co. began construction of a small building. Payments of P120,000 were made monthly for four months beginning on April 1. The building was completed and ready for occupancy on August 1. For the purpose of determining the amount of interest cost to be capitalized, calculate the weighted-average accumulated expenditures on the building by completing the schedule below: Date Expenditures Capitalization Period Weighted-Average Expenditures _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
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The Lane Company incurred the following expenditures in January 2016: (1) research and development costs of $510,000 that resulted in a new product that was patented during the year, (2) $12,000 in legal fees to have the patent registered, (3) $100,000 in advertising costs to develop a trademark for the newly patented product, (4) Legal fees of $8,000 incurred with the registration of the trademark, which will only be used for five years, and (5) $25,000 of advertising costs to promote its good name. Benefits to be derived from the patent are expected to last for five years. The president believes the promotion of Lane's good name will benefit the firm for three years. How much amortization expense should Lane recognize for 2016?

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