On January 1, 2016, Dreamworld Co. began construction of a newwarehouse. The building was finished and ready for use on September30, 2017. Expenditures on the project were as follows: January 1,2016 $313,000 September 1, 2016 $465,000 December 31, 2016 $465,000March 31, 2017 $465,000 September 30, 2017 $313,000 Dreamworld had$5,500,000 in 15% bonds outstanding through both years. The averageaccumulated expenditures for 2017 by the end of the constructionperiod was: $1,313,200. $2,021,000. $1,009,750. $1,623,200.
On January 1, 2016, Dreamworld Co. began construction of a newwarehouse. The building was finished and ready for use on September30, 2017. Expenditures on the project were as follows: January 1,2016 $313,000 September 1, 2016 $465,000 December 31, 2016 $465,000March 31, 2017 $465,000 September 30, 2017 $313,000 Dreamworld had$5,500,000 in 15% bonds outstanding through both years. The averageaccumulated expenditures for 2017 by the end of the constructionperiod was: $1,313,200. $2,021,000. $1,009,750. $1,623,200.
Related questions
7. A company receiving a donated asset will record:
a. an increase in revenue
b. an increase in liabilities
c. a decrease in liabilities
d. an increase in revenue and a decrease in liabilities
8. Alamos Co. exchanged equipment and $17,500 cash for similar equipment. The book value and the fair value of the old equipment were $81,800 and $90,300, respectively.
Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of:
a.$0
b. $8,500
c. $26,000
d. $(8,500)
9. On January 1, 2018, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:
| January 1, 2018 | $ | 200,000 | |
| September 1, 2018 | $ | 300,000 | |
| December 31, 2018 | $ | 300,000 | |
| March 31, 2019 | $ | 300,000 | |
| September 30, 2019 | $ | 200,000 | |
Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2018. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2018 and 2019.
Average accumulated expenditures for 2018 was:
a. $300,000
b. $350,000
c. $500,000
d. $400,000
10. On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:
| January 1, 2018 | $ | 323,000 | |
| September 1, 2018 | $ | 483,000 | |
| December 31, 2018 | $ | 483,000 | |
| March 31, 2019 | $ | 483,000 | |
| September 30, 2019 | $ | 323,000 | |
Dreamworld had $6,100,000 in 15% bonds outstanding through both years.
Dreamworld's capitalized interest in 2018 was:
a. $84,712
b. $48,450
c. $72,600
d. $96,900
11. Software development costs are capitalized if they are incurred:
a. Prior to the point at which technological feasibility has been established.
b. after commercial production has begun
c.After technological feasibility has been established but prior to the product availability date.
d. none of these answers
12.Cebrex Software began a new development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2018?
a. $0
b. $5,600,000
c. $1,400,000
d. $3,200,000
| On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. |
| Expenditures on the project were as follows: |
| January 1, 2016 | $ | 1,230,000 | |
| March 1, 2016 | 720,000 | ||
| June 30, 2016 | 380,000 | ||
| October 1, 2016 | 670,000 | ||
| January 31, 2017 | 990,000 | ||
| April 30, 2017 | 1,305,000 | ||
| August 31, 2017 | 2,340,000 | ||
| On January 1, 2016, the company obtained a $3 million construction loan with a 12% interest rate. The loan was outstanding all of 2016 and 2017. The companyâs other interest-bearing debt included two long-term notes of $5,600,000 and $7,600,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2016 and 2017. Interest is paid annually on all debt. The companyâs fiscal year-end is December 31. Assume the $3 million loan is not specifically tied to construction of the building. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 2. | What is the total cost of the building? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) |
| 3. | Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
