Case A

Robert Sporting Goods Company has been experiencing growth in the demand for its products, post COVID-19. To be able to meet quantity commitments, the company has to obtain additional manufacturing capacity. It purchased land for a new factory site for $600 000 on January 1, 2021 and paid $60 000 to tear down two buildings that were on the land. Salvage from the demolition was sold for $5 400.

Legal fees of $3 480 were paid for title investigation and making the purchase along with the Architect's fees of $31 200. Title insurance cost of $2 400, and liability insurance during construction cost of $2 600 were incurred.

Excavation works amounted $10,440. The contractor, BDO Construction Ltd was paid

$2 200 000. An assessment made by the Government Housing and Infrastructure Authorities (GHIA) for pavements was valued at $6 400.

Interest costs incurred during construction amounted to $170 000.

Required:

What is the cost of the land that should be capitalized on the books by Robert Sporting Goods Company? Complete the schedule below. If a

line item does not apply place zero in the field in the number column. Do not leave any number fields blank.

Land: $

Purchase value

Demolition cost

Salvage value

Legal fees for title investigation

Architect fees

Title insurance cost

Liability insurance cost

Excavation cost

Contractor fees

Assessment for pavement cost

Interest cost

Capitalized cost of Land

Case B

Required:

What amount should be recorded as machinery depreciation for the year ended December 31, 2021 and 2022 respectively? Complete the schedule provided below.

Sum of the years' digits factor

Depreciable base $

April 1, 2021 to March 31, 2022 $ Depreciation expense

April 1, 2022 to March 31, 2023 $ Depreciation expense

Depreciation expense for year $ ended December 31, 2021

Depreciation expense for year $ ended December 31, 2022

Case C

Robert Sporting Goods Company had purchased some equipment (Q107) on January 1, 2014 for $104 000 with an estimated salvage value of $8 000 and a 10-year useful life. On December 31, 2020, there was $67 200 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. In preparation for expansion, on March 31, 2021, that equipment was sold for $21 000.

Required:

i) Complete the following schedule of useful working.

Equipment (Q107): $

Cost

Salvage Value

Depreciable base

Annual Depreciation charge

Accumulated depreciation to the date of disposal

ii) Prepare the necessary journal entries to record the disposal of the equipment on March 31, 2021. When selecting from dropdown lists, if a line item does not apply, select NA and place zero in the field in the number column. Do not leave any number fields blank.

March 31, 2021

Dr

$

Dr Cash $

Dr

Dr

Cr

Cr

Case D

$

$

$

$

Robert Sporting Goods Company constructed a building that qualified for interest capitalization. The construction began at the beginning of the 2020 and was completed at the end of the year.

The construction cost totaled $10 200 000 and the weighted average accumulated expenditure associated with the asset was $6 800 000.

Robert Sporting Goods Company had outstanding notes payable during the entire year of construction comprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified for the construction of the qualified asset.

Required:

Complete the following schedules to calculate the following for 2020:

i) Actual interest

ii) Capitalization rate

iii) Avoidable interest

iv) Capitalized interest

v) Interest expensed

vi) Capitalized cost of the building

Principal ($)

Interest ($)

$

%

8% Note Payable

9% Note Payable

2020:

i. Actual interest

ii. Capitalization rate

Total

iii. Avoidable interest

$

Required:

Fair value less cost of Disposal

Value in use or discounted net cash flows Undiscounted net cash flows

$4 500 000 4 000 000

5 500 000

Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a line item does not apply, select NA and place zero in the field in the number column. Do not leave any number fields blank.

$ $

$

Dr Cr

$

$