Capitalization of Interest, Specific and General Debt, Computing Weighted-Average Accumulated Expenditures, Journal Entries, IFRS. Assume that the Yawyag Corporation in E11-8 is an IFRS reporter and complete the following:
Required
- a. Compute the weighted-average accumulated expenditures for the current year.
- b. Compute the amount of interest related to the construction project and actual interest cost for the current year.
- c. Indicate the amount of total interest to be capitalized and the amount of interest expense for the year.
- d. Prepare the
journal entry to record the December 31 interest payment Assume that the interest is paid in cash and that any interest capitalized is recorded in the construction in progress account.
E11-8 Capitalization of Interest, Specific and General Debt, Computing Weighted-Average Accumulated Expenditures, Journal Entries. Yawyag Corporation engaged Sir Peter, Inc. to design and construct a manufacturing facility. Construction began on January 2 and was completed on December 31 of the current year. The following payments were made to the contractor during the year:
Date | Amount |
January 2 | $2,400,000 |
August 1 | 1,800,000 |
October 1 | 3,600,000 |
December 1 | 1,200,000 |
To specifically finance the project, Yawyag issued $2 800,000 of 3-year, 5% notes payable on January 2. Interest is payable annually on December 31 each year. Prior to the commencement of the latest construction project, Yawyag had other debt in its capital structure. All general debt is outstanding as of the beginning of the current year. The general debt consists of $5,000,000 par
Required
- a. Compute the weighted-average accumulated expenditures for the current year.
- b. Compute the amount of avoidable interest and actual interest cost for the current year.
- c. Indicate the amount of total interest to be capitalized and the amount of interest to expense for the year.
- d. Prepare the journal entry to record the December 31 interest payments. Assume that the interest is paid in cash and that any interest capitalized is recorded in the Construction in Progress account.
Want to see the full answer?
Check out a sample textbook solutionChapter 11 Solutions
Intermediate Accounting
- An expenditure for general obligation long-term debt is always recorded at year-end in the governmental funds fora. accrued interest and accrued principal.b. accrued principal but not accrued interest.c. accrued interest but not accrued principal.d. neither accrued interest nor accrued principal.arrow_forwardFor long-term construction projects, the amount of “billings” is reported in the balance sheet by: Multiple Choice netting it against “construction in progress.” adding it to “construction in progress.” adding it to “accounts receivable.” netting it against “accounts receivable.”arrow_forwardWhich of the following should be disclosed in the Summary ofSignificant Accounting Policies?a. rent expense amount b. maturity dates of long-term debtc. methods of amortizing intangiblesd. composition of plant assetsarrow_forward
- The fund that records the payment of principal and interest associated with long-term debt is the _________________, and the fund that records construction project activity is the _______________. None of these capital projects fund; debt service fund general fund; permanent fund capital projects fund; general fund debt service fund; capital projects fundarrow_forwardKA The following transactions take place: • A commitment was made to transfer general revenues to the entity in charge of providing transportation for all government agencies. • Construction bonds were issued at a premium. The premium is to be included in funds accumulated to retire the debt. • Police salaries were paid. • Interest and principal were paid on general obligation serial bonds. Required: Indicate the name of the fund(s) in which each of the transactions or events should be recorded.arrow_forwardThe long-term asset account group is used for which of the following funds? Enterprise Capital Projects Internal Service General Both b and darrow_forward
- For each of the following transactions, determine the correct debit account from among the choices below: A. Expenditures B. Encumbrances C. Property, Plant, and Equipment (Capital Assets) D. Expenses E. Appropriations F. Other Financing Uses-Transfers Out G. Extraordinary Item H. Special Items I. Liabilities J. Answer not included in the above selections A proprietary fund signs a contract to build an office building with Do Good Construction for $10,000,000 Answer 1 Question 3 A proprietary fund makes a currently due principal payment on Bonds Payable Answer 2 Question 3 A proprietary fund recognizes and pays an interest payment that is currently due Answer 3 Question 3 A proprietary fund spends $5,000,000 of a capital grant for construction of a parking garage. Assume eligibility has been met Answer 4 Question 3 A city’s water supply in a proprietary fund is contaminated by terrorists. Cost of clean up, disposal and…arrow_forwardThe City of Minden entered into the following transactions during the year 2026. 1. 2. 3. 4. 5. 6. 7. 8. 9. A bond issue was authorized by vote to provide funds for the construction of a new municipal building, which it was estimated would cost $1,080,000. The bonds are to be paid in 10 equal installments from a Debt Service Fund, and payments are due March 1 of each year. Any premium on the bond issue, as well as any balance of the Capital Projects Fund, is to be transferred directly to the Debt Service Fund. An advance of $74,000 was received from the General Fund to underwrite a deposit on the land contract of $111,000. The deposit was made. Bonds of $992,000 were sold for cash at 102. It was decided not to sell all the bonds because the cost of the land was less than expected. Contracts amounting to $884,000 were let to Sunny and Company, the low bidder, for construction of the municipal building. The temporary advance from the General Fund was repaid and the balance on the land…arrow_forwardgener a rullu neverve rullu TULOA Revenues Property taxes Intergovernmental Miscellaneous Total revenues Expenditures Current Personnel services Supplies Capital outlay Debt service Principal Interest Total expenditures Excess of revenues over expenditures Other financing sources (uses): Issuance of debt Transfers from other funds Transfers to other funds Total other financing sources (uses) Fund balance beginning of year Excess of revenues and other sources over (under) expenditures and other uses Fund balance end of year Additional information: $ 284,000 29,700 4,800 $ 20,100 318,500 20,100 $ 284,000 49,800 4,800 338,600 145,500 22,500 14,100 159,600 22,500 115,000 115,000 5,000 7,800 5,000 7,800 $ 295,800 $ 14,100 $ 309,900 22,700 6,000 28,700 38,400 38,400 7,700 7,700 (7,700) (7,700) 30,700 7,700 38,400 53,400 13,700 67,100 24,200 8,200 32,400 $ 77,600 $ 21,900 $ 99,500 a. Property taxes expected to be collected more than 60 days following year-end are deferred in the fund-basis…arrow_forward
- The following are classified as current liabilities on the balance sheet: Inventory, Short-term Debt, and Deferred Revenue. Short-term Debt, Accounts Payable, and Deferred Revenue. Sales Taxes Payable, Current Operating Lease Liabilities, and Common Stock. Short-term Debt, Income Taxes Payable, and Land. please xplain and give thge correct letterarrow_forwardGeneral tax revenues RO 250,000, were paid to the fund to be used to pay principal and interest on the developmental bonds. Which one of the following journal entries records the transfer of fund transaction in the debt service fund? a.Bank Account Dr. 250,000, Transfer from general fund Account Cr. 250,000 b. Loan Account Dr. 250,000, Bank Account Cr. 250,000 c. Bank Account Dr. 250,000, Transfer from debt service fund Account Cr. 250,000 d. None of the options Clear my choicearrow_forwardIdentify the letter that best describes the accounting and reporting by the following funds and account groups:1. Enterprise fund fixed assets.2. Capital projects fund.3. General fixed assets.4. Infrastructure fixed assets.5. Enterprise fund cash.6. General fund.7. Agency fund cash.8. General long-term debt.9. Special revenue fund.10. Debt service fund.a. Accounted for in a fiduciary fund.b. Accounted for in a proprietary fund.c. Accounted for in a quasi-endowment fund.d. Accounted for in a self-balancing account group and included in financial statements.e. Accounted for in a special assessment fund.f. Accounts for major construction activities.g. Accounts for property tax revenues.h. Accounts for payment of interest and principal on tax-supported debt.i. Accounts for revenues from earmarked sources to finance designated activities.j. Reporting is optional.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub