1. At Dec. 31, 2020, Evonik industries Inc. estimates total bad debts that will become uncollectible in the future as $60,000. The existing balance in the allowance for doubtful accounts is a credit balance of $15,000. The accounts receivable balance at Dec. 31, 2020 is $985,200.

• If Evonik Industries Inc. uses percentage of receivables basis to estimate its bad debts, the amount of the bad debt adjusting entry at Dec. 31, 2020 will impact the statement of financial position accounts. Please try to describe the changes, and try to confirm the cash realizable value of accounts receivable reported on the financial position statement at Dec. 31, 2020.
• The total credit sales for 2020 are $25,000,000 and about 2% of credit sales are estimated as uncollectible. If Evonik Industries Inc. uses percentage of sales basis to estimate its bad debts, please try to describe the changes, and try to confirm the cash realizable value of accounts receivable reported on the financial position statement at Dec. 31, 2020.

2. The following table shows the comparative statement of financial position for Evonik Industries Inc.

	Dec. 31, 2020	Dec. 31, 2019
Land	$18,000	$40,000
Equipment	70,000	60,000
Accumulated depreciation	(20,000)	(13,000)
Prepaid insurance	25,000	17,000
Accounts receivable (net)	80,000	60,000
Cash	36,000	31,000
Share capital-ordinary	140,000	115,000
Retained earnings	31,000	55,000
Bonds payable	27,000	19,000
Accounts payable	11,000	6,000

• Cash dividends of $9,000 were declared and paid in 2020.
• Net loss for 2020 is $15,000.
• Equipment with a cost of $15,000 and accumulated depreciation of 10,000 was sold for $5,000 cash.
• Land was sold for cash at a loss of $7,000. This was the only land transaction during the year.
• $12,000 of bonds were retired during the year at carrying (book) value.
• Equipment was acquired for ordinary shares. The fair value of the shares at the time of the exchange was $25,000.

Please prepare a statement of cash flows for the year ended 2020, using indirect method.

3. In 2020, the Evonik Industries Inc. engaged Benner Inc. to design and construct a new manufacturing facility. The construction period was estimated to be one year and it should be completed on Dec. 31, 2020.

Date	Payment
Mar. 1, 2020	$550,000
Jun. 1, 2020	250,000
Jul. 31, 2020	950,000
Oct. 1, 2020	120,000
Dec. 31, 2020	150,000

The Evonik Industries Inc. issued the following during 2020 to finance the construction:

• 500,000 of 10-year, 10% bonds payable, issued on Feb. 2, 2020, with interest payable annually on Feb. 2.
• 100,000 of 5-year, 12% notes payable, issued on Feb. 15, 2020, with interest payable annually.

In addition, the only debt outstanding during 2020 was a $500,000, 8% note payable dated Mar. 15, 2015 and due Mar. 15 2022, with interest payable annually on Mar 15.

• Please try to confirm the weighted-average accumulated expenditures qualifying for capitalization of interest cost.
• Please try to confirm the avoidable interest incurred during 2020.
• Please try to confirm the total amount of interest cost to be capitalized during 2020.