3101 Homework Solutions ch.10

# 3101 Homework Solutions ch.10 - Acct 3101 Intermed. Acctg 1...

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Acct 3101 Intermed. Acctg 1 Homework Solutions Text: Kieso et al. 13 th ed. Chapter 10 EXERCISE 10-1 Item Land Land Improvements Building Other Accounts (a) (\$275,000) Notes Payable (b) \$275,000 (c) \$ 10,000 (d) 7,000 (e) 6,000 (f) (1,000) (g) 25,000 (h) 250,000 (i) 9,000 (j) \$ 4,000 (k) 11,000 (l) (5,000) (m) 13,000 (n) 19,000 (o) 14,000 (p) 3,000 File: 3101 homework solutions ch.10 Page 1

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EXERCISE 10-8 (a) Computation of Weighted-Average Accumulated Expenditures Expenditure Date Expenditure Amount X Capitalization Period = Weighted-Average Accumulated Expenditures March 1 \$ 360,000 10/12 \$ 300,000 June 1 600,000 7/12 350,000 July 1 1,500,000 6/12 750,000 December 1 1,200,000 1/12 100,000 \$3,660,000 \$1,500,000 Computation of Avoidable Interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest \$1,500,000 12% (Construction loan) \$180,000 Computation of Actual Interest \$3,000,000 X 12% \$360,000 \$4,000,000 X 11% 440,000 \$1,600,000 X 10% 160,000 \$960,000 Note : Use avoidable interest for capitalization purposes because it is lower than actual interest. (b) Building. ....................................................................... 180,000 Interest Expense*. ....................................................... 780,000 Cash (\$360,000 + \$440,000 + \$160,000). ......... 960,000 *Actual interest for year \$ 960,000 Less: Amount capitalized (180,000 ) File: 3101 homework solutions ch.10 Page 2
Interest expense debit \$ 780,000 File: 3101 homework solutions ch.10 Page 3

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EXERCISE 10-18 (a) Exchange has commercial substance : Depreciation Expense. ................................................ 800 Accumulated Depreciation—Melter. .............. 800 (\$12,700 – \$700 = \$12,000; \$12,000 ÷ 5 = \$2,400; \$2,400 X 4/12 = \$800) Melter. .......................................................................... 15,200** Accumulated Depreciation—Melter. ........................ 8,000 Gain on Disposal of Plant Assets. .................... 500* Melter. ................................................................ 12,700 Cash. .................................................................. 10,000
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## This note was uploaded on 04/29/2011 for the course ACCT 3001 taught by Professor Erickson during the Spring '10 term at University of Minnesota Duluth.

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3101 Homework Solutions ch.10 - Acct 3101 Intermed. Acctg 1...

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