Case DRobert Sporting Goods Company constructed a building that qualified for interest capitalization. Theconstruction began at the beginning of the 2020 and was completed at the end of the year.The construction cost totaled $10 200 000 and the weighted average accumulated expenditure associated withthe asset was $6 800 000.Robert Sporting Goods Company had outstanding notes payable during the entire year of constructioncomprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified forthe construction of the qualified asset.Required:Complete the following schedules to calculate the following for 2020:i) Actual interesti) Capitalization rateiii) Avoidable interestiv) Capitalized interestv) Interest expensedvi) Capitalized cost of the building

Interest Capitalization: Capitalized interest is the borrowing cost for acquiring the long-term…

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On 1st July 2019, the Director Finance of Sapphire Fabrics Ltd., wishes to know the working capital requirement for the current year to arrange the short-term financing. The following information are available: (i) Issued and paid-up capital Rs. 4,000,000. (ii) 10% TFCs Rs. 1,000,000. (iii) Fixed assets valued at Rs. 2,500,000 on 30th June 2019. The depreciation for the current year is Rs. 250,000. (iv) Production during the previous year was 4,000 units. It is planned that this level of activity should be increased by 50% during the current year. (v) The expected ratios of cost to selling price are ñ raw materials 60%, direct wages 10%, and overheads 20%. (vi) Raw materials are expected to remain in stores for an average of two months before these are issued for production. (vii) Each unit of production is expected to be in process for one month. (viii) Finished goods will stay in warehouse for approximately three months. (ix) The suppliers grant credit for two months from the date of…
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In early February 2020, Bridgeport Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition: Feb. 1 Mar. 1 July 1 Dec. 1 Dec. 31 Payment #1 to contractor Payment to architect Payment #2 to contractor Payment #3 to contractor Asset carrying amount $168,000 21,000 64,400 177,000 Amount of interest $ $430,400 On February 1, Bridgeport issued a $102,000, three-year note payable at a rate of 11% 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-2020 9%, 15-year bonds, issued May 1, 2005, matured May 1, 2020 6%, 10-year bonds, issued June 15, 2014 6%, 12-year bonds, issued May 1, 2020 Principal amount $303,000 $500,000 $303,000 What amount of interest should be capitalized for the fiscal year ending…
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1. Prepare a schedule showing the revenue, cost and gross profit earned each year using thepercentage of completion method, using the engineer’s estimate as a measure ofcompletion.2. Prepare all journal entries required to reflect the contract3. Prepare journal entries for 2020 assuming zero profit method is used.
Explain clearly
Salmania Co. began working on a project on August 2019, to construct a BD8,250,000 bridge that is expected to be completed in October 2020, at an estimated cost of BD6,000,000. At the end of 2019, the costs to date were BD2,400,000 and the estimated total costs to complete had not changed. The progress billings during 2019 were BD1,600,000 and the cash collected during 2019 was BD1,475,000. Salmania uses the percentage-of-completion method. What amount would be reported in Construction in Process at December 31, 2019?

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Required: Complete the following schedules to calculate the following for 2020: ) Actual interest in) Capitalization rate iii) Avoidable interest iv) Capitalized interest v) Interest expensed vi) Capitalized cost of the building