3rd Edition

ISBN: 9780136946694

Author: GORDON

Publisher: RENT PEARS

See similar textbooks

Videos

Textbook Question

Chapter 11, Problem 11.10E

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 value, 6% bonds payable, and a $1,000,000, 9% note payable. Both debt instruments require annual interest payments each December 31.

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 11, Problem 11.9E

Chapter 11, Problem 11.11E

Students have asked these similar questions

Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $10 per ounce. The cost information for the Aftershave Division is as follows: Variable costs per ounce $ 6.00 Fixed costs per ounce $ 15.00 Monthly production capacity 30,000 ounces If the Aftershave Division is not operating at full capacity and is able to supply the Deodorant Division with its needs for the chemical, what is the minimum transfer price that the Aftershave Division will accept? Multiple Choice None of the choices is correct. $10.00 per ounce $6.00 per ounce $15.00 per ounce $3.00 per ounce

Brar Incorporated supplied the following financial information for analysis: Depreciable assets (purchased at the beginning of year 1) $ 4,500,000 Profits before depreciation (all in cash flows at end of year): Year 1 960,000 Year 2 1,400,000 Year 3 2,100,000 Replacement cost of depreciable assets at end of: Year 1 $ 5,000,000 Year 2 6,200,000 Year 3 7,600,000 The assets are depreciated at a rate of 12% per year and have no salvage value. What is the ROI for year 2 using historical cost, net book value? Multiple Choice 26.60% 24.72% 25.15% 22.64% None of these.

Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $27 per ounce. The cost information for the Aftershave Division is as follows: Variable costs per ounce $ 6.00 Fixed costs per ounce $ 15.00 Monthly production capacity 30,000 ounces If the Aftershave Division is operating at full capacity and can sell all of the chemical that it can produce, what is the minimum transfer price that the Aftershave Division will accept? Multiple Choice None of the choices is correct. $6.00 per ounce $21.00 per ounce $15.00 per ounce $27.00 per ounce

Chapter 11 Solutions

INTERMEDIATE ACCOUNTING

Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Solution Summary: The author concludes that the weighted average accumulated expenditure for the current year is 4,150,000.

Videos

Want to see the full answer?

Chapter 11 Solutions