Provide this question solution general accounting On January 1, 2014, Oksana Baiul, Inc. signed a fixed-price contract tohave Builder Associates construct a major plant facility at a costof $4,460,000. It was estimated that it would take 3 years to complete theproject. Also on January 1, 2014, to finance the construction cost, OksanaBaiul borrowed $4,460,000 payable in 10 annual installmentsof $446,000, plus interest at the rate of 10%. During 2014, Oksana Baiulmade deposit and progress payments totaling $1,672,500 under thecontract; the weighted-average amount of accumulated expenditureswas $891,999 for the year. The excess borrowed funds were invested inshort-term securities, from which Oksana Baiul realized investmentincome of $254,000.What amount should Oksana Baiul report as capitalized interest atDecember 31, 2014?

Step 1: Calculate Avoidable Interest• Formula: Avoidable Interest = Weighted-Average Accumulated…

Answered: On January 1, 2014, Oksana Baiul, Inc.…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 18PC

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On January 1, 2020, Marigold, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,419,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2020, to finance the construction cost, Marigold borrowed $4,419,000 payable in 10 annual installments of $441,900, plus interest at the rate of 10%. During 2020, Marigold made deposit and progress payments totaling $1,657,125 under the contract; the weighted-average amount of accumulated expenditures was $883,800 for the year. The excess borrowed funds were invested in short-term securities, from which Marigold realized investment income of $254,600. What amount should Marigold report as capitalized interest at December 31, 2020?
ABC Company obtained a loan of $100,000 at 10% annual interest rate on January 1, 2022. The loan was used to finance a project that qualifies for capitalization of borrowing costs. The company incurs $2,000 in loan processing fees and $1,500-in legal fees related to the loan. The project is completed on December 31, 2022. The weighted average cost of capital of ABC Company is 12%. Compute the amount of borrowing costs to be capitalized and the amount to be expensed in the income statement for the year ended December 31, 2022.
Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2018 it leased equipment with a cost of P480,000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments of P175,820 at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double-declining balance method. The selling price of the equipment is P780,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co. Question: Why is that the book value of the leased asset at December 31, 2018 is 468,000? Explain thoroughly your answer.
On January 1, 2021, Famous Inc. acquired a piece of equipment for a list price of $340,000. It paid $50,000 cash and issued a 3-year note payable for the remainder. The note requires annual payments of a 3% interest every December 31. Famous Ic. also paid $16,000 to install the equipment, and $6,000 to test it. At the end of the testing, the company was able to obtain an output of good quality and sold it for $2,300. Famous Inc.'s incremental borrowing rate is 5%. The equipment's useful life is $80,000 at the end of its 10-year useful life. It was ready for use on March 31, 2021, but the company started using it on April 30th, 2021. Famous is a public company and uses the straight-line method to depreciate its equipment. Required- 1- Prepare the journal entry to record the acquisition of the equipment. 2- Prepare the required adjusting entries on December 31, 2021.
Valley Produce received $50,000 in vendor financing at 7.8% compounded semiannually for the purchase of harvesting machinery. Equal annual payments of $9,587.89 will repay the debt in seven years, including $17,115.26 in interest. Suppose the loan permits an additional prepayment of principal on any scheduled payment date. Prepare the amortization schedule that reflects a prepayment of $10,000 with the second scheduled payment. How much interest is saved as a result of the prepayment?
On 1 May 2021, Topdog Ltd. buys and puts into service an item of specialised equipment to increase the production capacity of its Property, Plant and Equipment. Details of the new equipment item are: Cost $314,000 Estimated residual value $14,000 Estimated useful life = 10 years (to be used equally over its life) The equipment will be purchased by issuing 110,000 shares at $1 each and borrowing the remaining amount. The loan will be repaid in a lump sum in 2025. The interest of 10% p.a. will be paid at the end of each 6 months after the purchase of the equipment. Topdog Ltd. failed to record the new equipment in the 30 June 2021 annual financial statements. Management discovered the omission in October 2021 and decided that the omission is material. Required: Prepare the journal entries in October 2021 to record the omitted information. Explain the change (including amounts) to Topdog Ltd’s net profit, total assets, total liabilities and total equity after the correction of…
Libby Company purchased equipment by paying $5,600 cash on the purchase date and agreed to pay $5,600 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The equipment reported on the balance sheet as of the purchase date is closest to: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.)
ABC, Inc. purchased an equipment at time=0 for $84,362. The shipping and installation costs were $28,520. The equipment is classified as a 5-year MACRS property. The investment in net working capital at time=0 was $12,792 which would be recouped at the end of the project. The project life is three years. At the end of the third year, the company will sell the equipment for $25,478. The annual cash flows are $25,453. What is the cash flow of the project in Year 3? That is, solve for CF3. Assume that the tax rate is 13% The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. Note: In the last year of the project, the Total Cash Flow = Operating Cash Flow + Terminal Cash Flow Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.
Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are $370000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Martinez Equipment Leasing and known to Cullumber Healthcare is 8%. Cullumber's incremental borrowing rate is 12%. The cost of the equipment on Martinez Equipment Leasing accounting records was $820000. Assuming that the lease is appropriately recorded as an operating lease, at what amount is the lease recorded on Cullumber Healthcare System's books on January 1, 2025? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 4 periods 3.57710 3.31213 0.73503 12%, 4 periods 3.40183 3.03735 0.63552 no entry to record an operating lease. $1323527 $1480000 $789167
g
Bridgeport Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Indigo Airlines for a period of 10 years. The normal selling price of the equipment is $281,987, and its unguaranteed residual value at the end of the lease term is estimated to be $21,100. Indigo will pay annual payments of $42,000 at the beginning of each year. Bridgeport incurred costs of $193,400 in manufacturing the equipment and $3,800 in sales commissions in closing the lease. Bridgeport has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Indigo Airlines has an incremental borrowing rate of 11%.
George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $299,140, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in sales commissions in closing the lease. George has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Instructions a. Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. 1. Lease receivable. 2. Sales price. 3. Cost of goods sold. b. Prepare a 10-year lease amortization schedule for George, the lessor. c. Prepare all of the lessor's journal entries for the first year.

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