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2. Nonmonetary exchange. A machine cost $300,000, has annual depreciation expense of $60,000, and has accumulated depreciation of $150,000 on December 31, 2017. On April
2. Nonmonetary exchange. A machine cost $300,000, has annual depreciation expense of $60,000, and has accumulated depreciation of $150,000 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $120,000, it is exchanged for a similar machine with a fair value of $360,000 and the proper amount of cash is paid. The exchange lacked commercial substance. Instructions Prepare all entries that are necessary at April 1, 2018. Debit Credit 3. Donated assets. Cheng Company has recently decided to accept a proposal from the City of Bel Aire that publicly owned property with a large warehouse located on it will be donated to Cheng if Cheng will build a branch plant in Bel Aire. The appraised value of the property is $500,000 and of the warehouse is $1,000,000. Instructions Prepare the entry by Cheng for the receipt of the properties. Debit Credit 4. Capitalization of interest During 2017, Barden Building Company constructed various assets at a total cost of $14,700,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2017 were $9,800,000. The company had the following debt outstanding at December 31, 2017: 1. 10%, 5-year note to finance construction of various assets, dated January 1, 2017, with interest payable annually on January 1 $6,300,000 2. 12%, ten-year bonds issued at par on December 31, 2011, with interest payable annually on December 31 7,000,000 3. 9%, 3-year note payable, dated January 1, 2016, with interest payable annually on January 1 3,500,000 Instructions Compute the amounts of each of the following (show computations). 1. Avoidable interest. 2. Total interest to be capitalized during 2017
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