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Question 1 (10 marks) Early in 2019, Tanya Corporation engaged a contractor Chavis, Inc. to design and construct Tanya's manufacturing facility. Construction begun on June 1 and completed on December 31, 2019. Tanya made the following expenditures during 2019: Date Payment Jun 1, 2019 $ 3,000,000 Oct 31, 2019 5,400,000 Tanya borrowed $2,000,000 on January 1, 2019, to specifically finance the construction. The loan has a stated interest rate of 8% and a 10-year maturity. In addition, Tanya had the following debt outstanding during 2019: 1. 12%, ten-year bonds issued at par on December 31, $ 4,000,000 2015, with interest payable annually on December 31 2. 9%, 3-year note payable, dated January 1, 2019, with 2,000,000 interest payable annually on January 1 Required: (a) Compute the weighted-average accumulated expenditures qualifying for capitalization of interest cost during 2019 (show computations). (2 marks) (b) Compute the weighted-average interest rate for the general borrowings (show computations). (2 marks) (c) Compute the avoidable interest during 2019 (show computations). (3 marks) (d) Compute the actual interest cost during 2019 (show computations). (2 marks) (e) Indicate the amount of interest cost to be capitalized during 2019. (1 mark) [Total for Question 1: 10 marks]Question 2 (15 marks) A. Mava Corp. purchased a warehouse for $3,040,000 on October 1, 2017. The warehouse has been depreciated using the sum-of-the-years'-digits method with the estimated usage summarized below: Useful life 20 years Residual value $ 205,000 Required: Al. Calculate the depreciation expense for the first full year of the warehouse's useful life from October 1, 2017, to September 30, 2018. (2 marks) 42. Calculate the depreciation expense for the second full year of the warehouse's useful life from October 1, 2018, to September 30, 2019. (2 marks) A3. Calculate the depreciation expense for the year ended December 31, 2018. (2 marks) B. Information related to trucks owned by Macy Corp. at December 31, 2019, is presented below. Cost $7,000,000 Accumulated depreciation to date 1,500,000 Value-in-use 5,000,000 Fair value less cost of disposal 4,400,000 Required: B1. Determine any impairment loss for the trucks on December 31, 2019. (2 marks) B2. Prepare the journal entry to record the impairment loss. (2 marks) C. Read each statement below carefully. On the answer sheet, put a T in the blanket if the statement is TRUE. Put an F in the blanket if the statement is FALSE. C1. Intangible assets derive their value from the right (claim) to receive cash in the future. C2. All research phase and development phase costs are expensed as incurred. C3. Capitalization of research phase costs begins once the project is economically viable. C4. Companies are required to assess the estimated useful life and salvage value of intangible assets at least annually. C5. Impairment testing is conducted annually for both limited-life and indefinite-life intangible assets. (5 marks) [Total for Question 2: 15 marks]Question 3 (10 marks) Harie Company has the following transactions related to non-current liabilities. On January 1, 2019, Harie Company issued 10% bonds with a par value of $1,000,000 due in 10 years. They were issued to yield 8% (i.e. the effective interest rate is 8%) and were callable at 102 at any date after January 1, 2020. Interest are payable semiannually on July 1 and January 1, starting from July 1, 2019. Required: (a) Compute the selling price of the bonds on January 1, 2019. (2 marks) (b) Prepare a bond amortization schedule up to and including January 1, 2020. (3 marks) (c) Prepare the journal entries to record the issuance of the bonds on January 1, 2019 and interest payment on July 1, 2019. (5 marks) (Ignore any potential impact of the bonds' callable nature on the selling price. Refer to the Appendices for Present Value tables and round your answer to the nearest dollar.) [Total for Question 3: 10 marks]
