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.
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Intermediate Accounting
- Bonds are issued at a premium by a capital projects fund. The premium should bea. retained in the capital projects fund.b. credited directly to the restricted fund balance of the capital projects fund.c. transferred to the debt service funds.d. used to reduce the net cost of the project involved.arrow_forwardThe 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_forward
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- gener 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_forwardInterest revenue for debt investments at fair value through other comprehensive income is computed based on the instruments’ a. face value using the effective interest rate. b. face value using the nominal interest rate. c. carrying amount using the effective interest rate. d. carrying amount using the nominal interest rate.arrow_forwardThe 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_forward
- Identify 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_forwardWhich of the following statements is true regarding capitalization of interest? O When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. O The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. O The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. O Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account.arrow_forwardTransactions associated with the financing process include all of the following except. Select one: Ⓒa. Periodic repayments of debt. O b. Issuance of equity securities. Purchase of treasury shares. Payroll for finance department employees. Od.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub