Chapter 10 PPE soll Revised - EXERCISE 10-6 1 Land Buildings Equipment Cash $700,000 X $150,000 $800,000 $350,000 $800,000 $300,000 $800,000 = $131,250

Chapter 10 PPE soll Revised - EXERCISE 10-6 1 Land...

This preview shows page 1 - 4 out of 9 pages.

EXERCISE 10-6 1.Land.................................................................................131,250Buildings...........................................................................306,250Equipment.........................................................................262,500Cash........................................................................700,000$700,000 X$150,000= $131,250Land$800,000$700,000 X$350,000= $306,250Buildings$800,000$700,000 X$300,000= $262,500Equipment$800,000EXERCISE 10-6 (Continued)3.Office Equipment..............................................................19,600Accounts Payable ($20,000 X .98).......................19,600EXERCISE 10-7 (a)Avoidable InterestWeighted-AverageAccumulated ExpendituresXInterest Rate=Avoidable Interest$2,000,00012%$240,0001,600,00010.42%166,720$3,600,000$406,720Weighted-average interest rate computationPrincipalInterest10% short-term loan$1,400,000$140,00011% long-term loan1,000,000110,000$2,400,000$250,000
Background image
Total Interest=$250,000= 10.42%Total Principal$2,400,000(b)Actual InterestConstruction loan$2,000,000 X 12% =$240,000Short-term loan$1,400,000 X 10% =140,000Long-term loan$1,000,000 X 11% =110,000Total$490,000Because avoidable interest is lower than actual interest, use avoidable interest.Cost$5,200,000Interest capitalized406,720Total cost$5,606,720Depreciation Expense=$5,606,720 – $300,000= $176,89130 yearsEXERCISE 10-8(a)Computation of Weighted-Average Accumulated ExpendituresExpendituresDateAmountXCapitalization Period=Weighted-Average Accumulated ExpendituresMarch 1$ 360,00010/12$ 300,000June 1600,0007/12350,000July 11,500,0006/12750,000December 11,500,0001/12125,000$3,960,000$1,525,000Computation of Avoidable InterestWeighted-AverageAccumulated ExpendituresXInterest Rate=Avoidable Interest$1,525,000.12 (Construction loan)$183,000Computation of Actual InterestActual interest$3,000,000 X 12%$ 360,000$4,000,000 X 13%520,000$1,600,000 X 10%160,000$1,040,000
Background image
Note: Use avoidable interest for capitalization purposes because it is lower than actual.(b)Building.............................................................................183,000Interest Expense*.............................................................857,000Cash ($360,000 + $520,000 + $160,000)...............1,040,000*Actual interest for year$1,040,000Less: Amount capitalized(183,000)Interest expense debit$ 857,000EXERCISE 10-11 (10–15 minutes)(a)Equipment.........................................................................10,000Accounts Payable.................................................
Background image
Image of page 4

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture