Avoidable interest weighted average accumulated

Info icon This preview shows pages 3–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Avoidable Interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest $2,000,000 12% $240,000 1,600,000 10.42% 166,720 $3,600,000 $406,720 Weighted-average interest rate computation Principal Interest 10% short-term loan $1,400,000 $140,000 11% long-term loan 1,000,000 110,000 $2,400,000 $250,000 Total Interest = $250,000 = 10.42% Total Principal $2,400,000 (b) Actual Interest Construction loan $2,000,000 X 12% = $240,000 Short-term loan $1,400,000 X 10% = 140,000 Long-term loan $1,000,000 X 11% = 110,000 Total $490,000 Because avoidable interest is lower than actual interest, use avoidable interest. Cost $5,200,000
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
ACCT 550 WEEK 6 HOMEWORK 4 Interest capitalized 406,720 Total cost $5,606,720 Depreciation Expense = $5,606,720 – $300,000 = $176,891 30 years P10-8 (Nonmonetary Exchanges) 1. Holyfield Corporation Cash 23,000 Machinery 69,000 Accumulated Depreciation—Machinery 60,000 Loss on Disposal of Machinery 8,000* Machinery 160,000 *Computation of loss: Book value $100,000 Less: Fair value 92,000 Loss $ 8,000 Dorsett Company Machinery 92,000 Accumulated Depreciation—Machinery 45,000 Loss on Disposal of Machinery 6,000* Cash 23,000 Machinery 120,000 *Computation of loss: Book value $ 75,000 Less: Fair value 69,000 Loss $ 6,000 2. Holyfield Corporation Machinery 92,000 Accumulated Depreciation—Machinery 60,000 Loss on Disposal of Machinery 8,000 Machinery 160,000 Winston Company Machinery ($92,000 – $11,000) 81,000* Accumulated Depreciation—Machinery 71,000 Machinery 152,000 *Computation of gain deferred: Fair value $92,000 Less: Book value 81,000
Image of page 4
ACCT 550 WEEK 6 HOMEWORK 5 Gain deferred $11,000 3. Holyfield Corporation Machinery 95,000 Accumulated Depreciation—Machinery 60,000 Loss on Disposal of Machinery 8,000 Machinery 160,000 Cash 3,000 Liston Company Machinery 92,000 Accumulated Depreciation—Machinery 75,000 Cash 3,000 Machinery 160,000 Gain on Disposal of Machinery 10,000* *Fair value $ 95,000 Less: Book value 85,000 Gain $ 10,000 Because the exchange has commercial substance, the entire gain should be recognized. 4. Holyfield Corporation Machinery 185,000 Accumulated Depreciation—Machinery 60,000 Loss on Disposal of Machinery 8,000 Machinery 160,000 Cash 93,000 Greeley Company Cash 93,000 Inventory 92,000 Sales Revenue 185,000 Cost of Goods Sold 130,000 Inventory 130,000
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern