Robert Sporting Goods Company has been experiencing growth in the demand for its products, post COVID-19. To be able to meet quantity commitments, the company has to obtain additional manufacturing capacity. It purchased land for a new factory site for $600 000 on January 1, 2021 and paid $60 000 to tear down two buildings that were on the land. Salvage from the demolition was sold for $5 400. Legal fees of $3 480 were paid for title investigation and making the purchase along with the Architect's fees of $31 200. Title insurance cost of $2 400, and liability insurance during construction cost of $2 600 were incurred. Excavation works amounted $10,440. The contractor, BDO Construction Ltd was paid $2 200 000. An assessment made by the Government Housing and Infrastructure Authorities (GHIA) for pavements was valued at $6 400. Interest costs incurred during construction amounted to $170 000. Required: What is the cost of the land that should be capitalized on the books by Robert Sporting Goods Company? Complete the schedule below. If a line item does not apply place zero in the field in the number column. Do not leave any number fields blank. Land $ Purchase value Answer Demolition cost Answer Salvage value Answer Legal fees for title investigation Answer Architect fees Answer Title insurance cost Answer Liability insurance cost Answer Excavation cost Answer Contractor fees Answer Assessment for pavement cost Answer Interest cost Answer Capitalized cost of Land Answer
Case A
Robert Sporting Goods Company has been experiencing growth in the demand for its products, post COVID-19. To be able to meet quantity commitments, the company has to obtain additional manufacturing capacity. It purchased land for a new factory site for $600 000 on January 1, 2021 and paid $60 000 to tear down two buildings that were on the land. Salvage from the demolition was sold for $5 400.
Legal fees of $3 480 were paid for title investigation and making the purchase along with the Architect's fees of $31 200. Title insurance cost of $2 400, and liability insurance during construction cost of $2 600 were incurred.
Excavation works amounted $10,440. The contractor, BDO Construction Ltd was paid
$2 200 000. An assessment made by the Government Housing and Infrastructure Authorities (GHIA) for pavements was valued at $6 400.
Interest costs incurred during construction amounted to $170 000.
Required:
What is the cost of the land that should be capitalized on the books by Robert Sporting Goods Company? Complete the schedule below. If a
line item does not apply place zero in the field in the number column. Do not leave any number fields blank.
| Land | $ |
| Purchase value | Answer |
| Demolition cost | Answer |
| Salvage value | Answer |
| Legal fees for title investigation | Answer |
| Architect fees | Answer |
| Title insurance cost | Answer |
| Liability insurance cost | Answer |
| Excavation cost | Answer |
| Contractor fees | Answer |
| Assessment for pavement cost | Answer |
| Interest cost | Answer |
| Capitalized cost of Land | Answer |
Case B
Required:
What amount should be recorded as machinery depreciation for the year ended December 31, 2021 and 2022 respectively? Complete the schedule provided below.
| Sum of the years' digits factor | $ Answer |
| Depreciable base | $ Answer |
| April 1, 2021 to March 31, 2022 Depreciation expense | $ Answer |
| April 1, 2022 to March 31, 2023 Depreciation expense | $ Answer |
| Depreciation expense for yearended December 31, 2021 | $ Answer |
| Depreciation expense for year ended December 31, 2022 | $ Answer |
Case C
Robert Sporting Goods Company had purchased some equipment (Q107) on January 1, 2014 for $104 000 with an estimated salvage value of $8 000 and a 10-year useful life. On December 31, 2020, there was $67 200 in the
Required:
i) Complete the following schedule of useful working.
| Equipment (Q107): | $ Answer |
| Cost | $ Answer |
| Salvage Value | $ Answer |
| Depreciable base | $ Answer |
| Annual Depreciation charge | $ Answer |
| Accumulated depreciation to the date of disposal | $ Answer |
ii) Prepare the necessary journal entries to record the disposal of the equipment on March 31, 2021. When selecting from dropdown lists, if a line item does not apply, select NA and place zero in the field in the number column. Do not leave any number fields blank.
March 31, 2021
| Dr | $ Answer | |
| Dr Cash | $ Answer | |
| Dr | $ Answer | |
| Dr | $ Answer | |
| Cr | $ Answer | |
| Cr | $ Answer |
Case D
Robert Sporting Goods Company constructed a building that qualified for interest capitalization. The construction 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 with the asset was $6 800 000.
Robert Sporting Goods Company had outstanding notes payable during the entire year of construction comprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified for the construction of the qualified asset.
Required:
Complete the following schedules to calculate the following for 2020:
i) Actual interest
ii) Capitalization rate
iii) Avoidable interest
iv) Capitalized interest
v) Interest expensed
vi) Capitalized cost of the building
|
Principal ($) |
Interest ($) |
|
|
8% Note Payable |
Answer | Answer |
|
9% Note Payable |
Answer | Answer |
| Total | Answer | Answer |
2020:
| i. Actual interest | |
| ii. Capitalization rate | |
| iii. Avoidable interest | |
|
iv) Capitalized interest |
|
|
v) Interest expensed |
|
| vi. Capitalized cost of the building |
Case E
Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020:
Equipment (Q102) $9 000 000
Accumulated Depreciation 3 000 000
Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information:
Fair value less cost of Disposal $4 500 000
Value in use or discounted net
Undiscounted net cash flows $5 500 000
Required:
Assess equipment (Q102) for impairment and prepare the
| Answer | $ Answer |
| Answer | $Answer |
| Answer | $Answer |
| Dr | $ Answer | |
| Cr | $ Answer |
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