On January 1, 2022, Flounder Outfitters signed a fixed-price contract to have Builder Associates construct a major piant facility ata cost of R$4,320,000. It was estimated that it would take 3 years to complete the project. Also on January 1. 2022, to finance theconstruction cost, Flounder borrowed R$4,320,000 payable in 10 annual installments of R$432,000, plus interest at the rateof 10%. During 2022, Flounder made deposit and progress payments totaling R$1.620,000 under the contract. The excessborrowed funds were invested in short-term securities, from which Flounder realized investment income of R$54,000.What amount should Flounder report as capitalized borrowing cost at December 31, 2022?Capitalized borrowing costR$

Interest paid on the borrowing which are specifically borrowed for a qualifying asset will be…

Answered: On January 1, 2022, Flounder Outfitters…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost c €4,400,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the followir obligations outstanding during the construction period. Construction loan-8% interest, payable semiannually, issued December 31, 2021 €1,800,000 Short-term loan-6% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,440,000 Long-term loan-7% interest, payable on January 1 of each year. Principal payable on January 1, 2026 900,000 (a) Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,680,000. The following expenditures were made during the period forthis project: January 1, €900,000; April 1, €1,300,000; July 1, €1,700,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €20,000 of…
Garnet Corporation enters into a 4-year construction contract worth $100 million with Gold company on January 1, 2022. At the end of 2022, construction costs totaled $20 million and Garnet estimates $60 million of construction costs remain. If Garnet uses the percent of completion method to determine revenues, how much revenue will Garnet recognize in 2022 related to the construction contract?
SMDC Construction is constructing an office building under contract for Onyx Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of P1,550,000 each quarter. The total contract price is P18,600,000 and SMDC Construction estimates total costs of P17,750,000. SMDC Construction estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. SMDC Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are P18,750,000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that SMDC Construction will recognize for the year ended December 31, 2020? Revenue Expenses A. P18,600,000 P18,750,000 B. P4,650,000 P 4,687,500 C. P4,650,000 P 5,250,000 D. P4,687,500 P 4,687,500 Group of answer choices D C B A
On January 1, 2023, Marigold Inc. signed a fixed-price contract to have Builder Associates construct a major head office facility a a cost of $4 million. It was estimated that it would take three years to complete the project. Also, on January 1, 2023, to finance the construction cost, Marigold borrowed $4 million that is repayable in 10 annual instalments of $400,000, plus interest at the rate of 10%. During 2023, Marigold made deposit and progress payments totalling $1.5 million under the contract; the weighted average amount of accumulated expenditures was $791,000 for the year. The excess amount of borrowed funds was invested in short-term securities, from which Marigold realized investment income of $24,300. For situation 1, what amount should Marigold report as capitalized borrowing costs at December 31, 2023? (If an answer is zero, please enter O. Do not leave any fields blank.) Capitalized borrowing $ 375700
Vikram
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2021, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet to be incurred. Billings of $2,500,000 were sent, and cash collected was $2,250,000. In 2022, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2022 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2023 after additional costs of $3,800,000 were incurred. The company's fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. 2a. Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 to record the transactions described (credit…
On January 1, 2020, Tamia & Co, sold a machinery and immediately leases it back for a period of 4 years. Remaining useful life of the machinery is 10 years. Selling price is P3,000,000. Carrying amount of the machinery is P2,250,000. Annual rental is P400,000 payable every December 31, starting December 31, 2020. Implicit rate is 10% and PV factor for ordinary annuity at 10% for 4 periods is 3.169865. If the fair value of the sold and leased asset is P3,200,000, what amount of gain/loss related to the right transferred shall be recognized by the seller-lessee? a. Zero b. 950,000 c. 435,796 d. 514,204
In 2024, KP Building Incorporated began work on a four-year construction project (called Cincy One). The contract price is $460 million. KP recognizes revenue on this contract over time according to percentage of completion. At the end of 2024, the following financial statement information indicates the results to date for Cincy One: INCOME STATEMENT: Gross profit (before-taxes) recognized in 2024 $ 43 million BALANCE SHEET: Accounts receivable from construction billings $ 30 million Construction in progress $ 86 million Less: Billings on construction $ (96 million) Net billings in excess of construction in progress $ 10 million Required: Compute the following, placing your answer in the spaces provided and showing supporting computations below. Note: Round your percentage answer to the nearest whole number. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).
Holly Springs, Incorporated contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2024. Holly Springs paid for the lathe by issuing a $300,000 note due in three years. Interest, specified at 2%, was payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions for which 6% was a reasonable rate of interest. Holly Springs uses the effective interest method of amortization. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required:1.Prepare the journal entry on January 1, 2024, for Holly Springs’ purchase of the lathe. 2.Prepare an amortization schedule for the three-year term of the note. 3.Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity.
LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2021. In payment for the $25.2 million purchase, LCD issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 18%.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:1. & 2. Prepare the journal entries for LCD’s purchase of the components on November 1, 2021 and the first installment payment on November 30, 2021.3. What is the amount of interest expense that LCD will report in its income statement for the year ended December 31, 2021?
Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $600,000, three-year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 12% was a reasonable rate of interest. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe. 3 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity. Complete this question by…

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