Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please provide solution to the attached document. 1. E10-1 (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land im- provements,

image text in transcribed

Please provide solution to the attached document.

1. E10-1 (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land im- provements, and buildings acquired for use in a business enterprise. The receipts are enclosed in parentheses.

(a) Money borrowed to pay building contractor (signed a note) (b) Payment for construction from note proceeds (c) Cost of land fill and clearing (d) Delinquent real estate taxes on property assumed by purchaser (e) Premium on 6-month insurance policy during construction

(f) Refund of 1-month insurance premium because construction completed early (g) Architects fee on building (h) Cost of real estate purchased as a plant site (land $200,000 and building $50,000) (i) Commission fee paid to real estate agency

(j) Installation of fences around property (k) Cost of razing and removing building (l) Proceeds from salvage of demolished building (m) Interest paid during construction on money borrowed for construction (n) Cost of parking lots and driveways (o) Cost of trees and shrubbery planted (permanent in nature) (p) Excavation costs for new building

Instructions

$(275,000) 275,000 8,000 7,000 6,000

(1,000) 22,000 250,000 9,000 4,000 11,000

(5,000) 13,000 19,000 14,000

3,000

Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title.

(Kieso 568)

2. E10-3 (Acquisition Costs of Trucks) Kelly Clarkson Corporation operates a retail computer store. To im- prove delivery services to customers, the company purchases four new trucks on April 1, 2014. The terms of acquisition for each truck are described below.

1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900. 2. Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zero- interest-bearing note with a face amount of $14,000. The note is due April 1, 2015. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incre-

mental borrowing rate of 8%. 3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Clarkson

carries in inventory. The computer system cost $12,000 and is normally sold by Clarkson for $15,200.

Clarkson uses a perpetual inventory system. 4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in

Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share.

Instructions

Prepare the appropriate journal entries for the above transactions for Clarkson Corporation.

(Kieso 568)

3. E10-7 (Capitalization of Interest) Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2014. Harrisburg expected to complete the building by December 31, 2014. Harrisburg has the following debt obligations outstanding during the construction period.

Construction loan12% interest, payable semiannually, issued December 31, 2013

Short-term loan10% interest, payable monthly, and principal payable at maturity on May 30, 2015

Long-term loan11% interest, payable on January 1 of each year. Principal payable on January 1, 2018

$2,000,000 1,400,000 1,000,000

(a) Assume that Harrisburg completed the office and warehouse building on December 31, 2014, as planned at a total cost of $5,200,000, and the weighted-average amount of accumulated expendi- tures was $3,600,000. Compute the avoidable interest on this project.

(b) Compute the depreciation expense for the year ended December 31, 2015. Harrisburg elected to depreciate the building on a straight-line

(Kieso 570)

4. P10-8 (Nonmonetary Exchanges) Holyfield Corporation wishes to exchange a machine used in its opera-

tions. Holyfield has received the following offers from other companies in the industry.

1. Dorsett Company offered to exchange a similar machine plus $23,000. (The exchange has commer- cial substance for both parties.)

2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)

3. Liston Company offered to exchange a similar machine, but wanted $3,000 in addition to Holyfields machine. (The exchange has commercial substance for both parties.)

In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay $93,000 in addition to trading in its old machine.

Machinecost Accumulated depreciation Fair value

Instructions

Holyfield Dorsett Winston Liston Greeley

$160,000 $120,000 $152,000 $160,000 $130,000 60,000 45,000 71,000 75,000 0 92,000 69,000 92,000 95,000 185,000

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

(Kieso 580)

Kieso, Donald E. Intermediate Accounting, 15th Edition, 2014 FASB Update. Wiley, 03/2013. VitalBook file.

image text in transcribed 1. E10-1 (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land im- provements, and buildings acquired for use in a business enterprise. The receipts are enclosed in parentheses. (a) Money borrowed to pay building contractor (signed a note) (b) Payment for construction from note proceeds (c) Cost of land fill and clearing (d) Delinquent real estate taxes on property assumed by purchaser (e) Premium on 6-month insurance policy during construction (f) Refund of 1-month insurance premium because construction completed early (g) Architect's fee on building (h) Cost of real estate purchased as a plant site (land $200,000 and building $50,000) (i) Commission fee paid to real estate agency (j) Installation of fences around property (k) Cost of razing and removing building (l) Proceeds from salvage of demolished building (m) Interest paid during construction on money borrowed for construction (n) Cost of parking lots and driveways (o) Cost of trees and shrubbery planted (permanent in nature) (p) Excavation costs for new building Instructions $(275,000) 275,000 8,000 7,000 6,000 (1,000) 22,000 250,000 9,000 4,000 11,000 (5,000) 13,000 19,000 14,000 3,000 Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title. (Kieso 568) 2. E10-3 (Acquisition Costs of Trucks) Kelly Clarkson Corporation operates a retail computer store. To im- prove delivery services to customers, the company purchases four new trucks on April 1, 2014. The terms of acquisition for each truck are described below. 1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900. 2. Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zero- interest-bearing note with a face amount of $14,000. The note is due April 1, 2015. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%. 3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Clarkson carries in inventory. The computer system cost $12,000 and is normally sold by Clarkson for $15,200. Clarkson uses a perpetual inventory system. 4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share. Instructions Prepare the appropriate journal entries for the above transactions for Clarkson Corporation. (Kieso 568) 3. E10-7 (Capitalization of Interest) Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2014. Harrisburg expected to complete the building by December 31, 2014. Harrisburg has the following debt obligations outstanding during the construction period. Construction loan12% interest, payable semiannually, issued December 31, 2013 Short-term loan10% interest, payable monthly, and principal payable at maturity on May 30, 2015 Long-term loan11% interest, payable on January 1 of each year. Principal payable on January 1, 2018 $2,000,000 1,400,000 1,000,000 (a) Assume that Harrisburg completed the office and warehouse building on December 31, 2014, as planned at a total cost of $5,200,000, and the weighted-average amount of accumulated expendi- tures was $3,600,000. Compute the avoidable interest on this project. (b) Compute the depreciation expense for the year ended December 31, 2015. Harrisburg elected to depreciate the building on a straight-line (Kieso 570) 4. P10-8 (Nonmonetary Exchanges) Holyfield Corporation wishes to exchange a machine used in its operations. Holyfield has received the following offers from other companies in the industry. 1. Dorsett Company offered to exchange a similar machine plus $23,000. (The exchange has commer- cial substance for both parties.) 2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.) 3. Liston Company offered to exchange a similar machine, but wanted $3,000 in addition to Holyfield's machine. (The exchange has commercial substance for both parties.) In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay $93,000 in addition to trading in its old machine. Machinecost Accumulated depreciation Fair value Instructions Holyfield DorsettWinston Liston Greeley $160,000 $120,000 $152,000 $160,000 $130,000 60,000 92,000 69,000 92,000 95,000 185,000 45,000 71,000 75,000 -0- For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company. (Kieso 580) Kieso, Donald E. Intermediate Accounting, 15th Edition, 2014 FASB Update. Wiley, 03/2013. VitalBook file

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Kurt Heisinger, Joe Ben Hoyle

2nd edition

1453375723, 1453375724, 978-1453375716

More Books

Students also viewed these Accounting questions

Question

2. What types of information are we collecting?

Answered: 1 week ago

Question

5. How quickly can we manage to collect the information?

Answered: 1 week ago

Question

3. Tactical/strategic information.

Answered: 1 week ago