ACCT 301 Connect Homework Chapter 10 solutions complete answers

ACCT 301 Connect Homework Chapter 10 solutions complete answers 

 

Just put your values given and automatically provide answers for you!

 

Question 1

 

Fullerton Waste Management purchased land and a warehouse for $730,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition: broker’s commission, $43,000; title insurance, $9,500; miscellaneous closing costs, $12,500. The warehouse was immediately demolished at a cost of $31,000 in anticipation of the building of a new warehouse.

 

Determine the amounts Fullerton should capitalize as the cost of the land and the building.

 

Question 2

 

A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $560,000; March 31, $660,000; June 30, $460,000; October 30, $780,000. To help finance construction, the company arranged a 9% construction loan on January 1 for $820,000. The company’s other borrowings, outstanding for the whole year, consisted of a $2 million loan and a $4 million note with interest rates of 11% and 8%, respectively.

 

Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%).)

 

Question 3

 

On March 1, 2021, Beldon Corporation purchased land as a factory site for $77,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2021. Costs incurred during this period are listed below:

 

Salvaged materials resulting from the demolition of the old building were sold for $3,700.

 

Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

 

Question 4

 

Oaktree Company purchased new equipment and made the following expenditures:

 

The equipment, including sales tax, was purchased on open account, with payment due in 30 days. The other expenditures listed above were paid in cash.

 

Prepare the necessary journal entries to record the above expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 5

 

Samtech Manufacturing purchased land and building for $3 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building:

 

An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $1 million, respectively. Shortly after acquisition, Samtech spent $102,000 to construct a parking lot and $60,000 for landscaping.

 

1. Determine the initial valuation of each asset Samtech acquired in these transactions.

 

2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $450,000 and the salvaged materials were sold for $7,500. In addition, Samtech spent $99,000 clearing and grading the land in preparation for the construction of a new building.

 

Question 6

 

On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,900,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:

 

Calculate the amount paid for goodwill.

 

Question 7

 

Cedric Company recently traded in an older model of equipment for a new model. The old model’s book value was $243,000 (original cost of $533,000 less $290,000 in accumulated depreciation) and its fair value was $270,000. Cedric paid $67,000 to complete the exchange which has commercial substance.

 

Prepare the journal entry to record the exchange. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 8

 

On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $1,850,000 at 10% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021:

 

Construction expenditures incurred during 2021 were as follows:

 

Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).)

 

Question 9

 

Tristar Production Company began operations on September 1, 2021. Listed below are a number of transactions that occurred during its first four months of operations. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

 

On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $180,000 in cash for the property. According to appraisals, the land had a fair value of $134,000 and the building had a fair value of $66,000.

 

On September 1, Tristar signed a $48,000 noninterest-bearing note to purchase equipment. The $48,000 payment is due on September 1, 2022. Assume that 9% is a reasonable interest rate.

 

On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,300.

 

On September 18, the company paid its lawyer $7,000 for organizing the corporation.

 

On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $23,000 and $900 in freight charges also were paid.

 

On December 2, Tristar acquired various items of office equipment. The company was short of cash and could not pay the $6,300 normal cash price. The supplier agreed to accept 200 shares of the company's no-par common stock in exchange for the equipment. The fair value of the stock is not readily determinable.

 

On December 10, the company acquired a tract of land at a cost of $28,000. It paid $6,000 down and signed a 11% note with both principal and interest due in one year. Eleven percent is an appropriate rate of interest for this note.

 

Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollars.)

 

Question 10

 

Consider each of the transactions below. All of the expenditures were made in cash.

 

The Edison Company spent $25,000 during the year for experimental purposes in connection with the development of a new product.

 

In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $8,500.

 

In March, the Cleanway Laundromat bought equipment. Cleanway paid $19,000 down and signed a noninterest-bearing note requiring the payment of $24,500 in nine months. The cash price for this equipment was $38,000.

 

On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $41,000.

 

The Mayer Company, plaintiff, paid $25,000 in legal fees in November, in connection with a successful infringement suit on its patent.

 

The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $13,900. The old equipment had an original cost of $13,900 and a book value of $6,900 at the time of the trade. Johnson also paid cash of $10,600 as part of the trade. The exchange has commercial substance.

 

Prepare journal entries to record each of the above transactions.

 

Question 11

 

On September 3, 2021, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows:

 

To equalize the exchange, Phifer paid Robers $9,000 in cash.

 

Record the exchange for both Robers and Phifer. The exchange has commercial substance for both companies. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 12

 

On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows:

 

On January 1, 2021, the company obtained a $3,700,000 construction loan with a 12% interest rate. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.

 

1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method.

 

2. What is the total cost of the building?

 

3. Calculate the amount of interest expense that will appear in the 2021 and 2022 income statements.