Part 1.a Applying Lower of Cost or Market value (LCM) to following items to determine fare inventory value Make necessary Joumal entry in case there is difference in inventory value compare to its original cost Product Inventory cost Sales Discount Sales Price Replacement Cost A 1,763 113 2.550 1,380 B 1,688 135 2.754 1,290 3,113 180 4,590 1.830 D 3,600 293 6,120 3.000 E 1.939 124 2.805 1,518 F 1.856 149 3,029 1,419 3,424 198 5,049 2,013 H 3.960 322 6.732 3,300 2.133 136 3,086 1,670 I b. On July 31, 2010. Bismarck Company engaged Duval Tooling Company to construct a special-purpose piece of factory machinery, Construction was begun immediately and was completed on November 1, 2010. To help finance construction, on July 31 Bismarck issued a $500,000. 4-year, 14% note payable at Wellington National Bank, on which interest is payable each July 31. $600,000 of the proceeds of the note was paid to Duval on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 8% until November 1. On November 1, Bismarck made a final $150.000 Payment to Duval. Other than the note to Wellington, Bismarck's only outstanding liability at December 31, 2010, is a $50,000. 6%, 6-year note payable, dated January 1, 2007, on which interest is payable each December 31. Instructions Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2010. Round all computations to the nearest dollar. (6 Marks) Part 2:- On December 31, 2009. Hurston Inc. borrowed $4.000.000 at 10% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $250,000: June 1, $500,000; July 1, $1,600,000: December 1, $1,100,000. Additional information is provided as follows. 1. Other debt outstanding 10-year, 11.5% bond, December 31, 2003, interest payable annually 6-year, 12.5 % note, dated December 31, 2007, interest payable annually 2. March 1, 2010, expenditure included land costs of $150,000 3. Interest revenue eamed in 2010 on funds related to specific borrowing $49,000 Instructions Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building Part 1.a Applying Lower of Cost or Market value (LCM) to following items to determine fare inventory value Make necessary Joumal entry in case there is difference in inventory value compare to its original cost Product Inventory cost Sales Discount Sales Price Replacement Cost A 1,763 113 2.550 1,380 B 1,688 135 2.754 1,290 3,113 180 4,590 1.830 D 3,600 293 6,120 3.000 E 1.939 124 2.805 1,518 F 1.856 149 3,029 1,419 3,424 198 5,049 2,013 H 3.960 322 6.732 3,300 2.133 136 3,086 1,670 I b. On July 31, 2010. Bismarck Company engaged Duval Tooling Company to construct a special-purpose piece of factory machinery, Construction was begun immediately and was completed on November 1, 2010. To help finance construction, on July 31 Bismarck issued a $500,000. 4-year, 14% note payable at Wellington National Bank, on which interest is payable each July 31. $600,000 of the proceeds of the note was paid to Duval on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 8% until November 1. On November 1, Bismarck made a final $150.000 Payment to Duval. Other than the note to Wellington, Bismarck's only outstanding liability at December 31, 2010, is a $50,000. 6%, 6-year note payable, dated January 1, 2007, on which interest is payable each December 31. Instructions Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2010. Round all computations to the nearest dollar. (6 Marks) Part 2:- On December 31, 2009. Hurston Inc. borrowed $4.000.000 at 10% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $250,000: June 1, $500,000; July 1, $1,600,000: December 1, $1,100,000. Additional information is provided as follows. 1. Other debt outstanding 10-year, 11.5% bond, December 31, 2003, interest payable annually 6-year, 12.5 % note, dated December 31, 2007, interest payable annually 2. March 1, 2010, expenditure included land costs of $150,000 3. Interest revenue eamed in 2010 on funds related to specific borrowing $49,000 Instructions Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building
