1:On June 1, 2014, Laser contracted with Black Construction to have a new building constructed for $ 4,000,000 on land owned by Laser.

The payments made by Laser to Black Construction are shown in the schedule below.

 

 

Date	Amount
July 30,2014	900,000
January 30, 2015	1,500,000
May 30, 2015	1,600,000
Total Payments	4,000,000

Construction was completed and the building was ready for occupancy on May 27, 2015. Laser had no new borrowings directly associated with the new building but had the followings debt outstanding at May 31, 2015, the end of the fiscal year.

 

• 10% - 5 year note payable of $ 2,000,000 dated April 1, 2011, with interest payable annually on April, 1.
• 12% - 10 year bond payable of $ 3,000,000 sold at par on June 30, 2007 with interest payable annually on June, 30.

 

Instructions:

1. Compute the WAAE on Laser new building during the capitalization period.
2. Compute the avoidable interest on Laser new building. (Round to one decimal place)
3. Prepare the journal entry for each expenditure and for the interest capitalization.

Problem 2: Composite depreciation 

 

Presented below is information related to Le Brown James Manufacturing Inc.

 

Asset	Cost	Estimated Salvage	Estimated Life
A	40,500	5,500	10
B	33,600	4,800	9
C	36,000	3,600	9
D	19,000	1,500	7
E	23,500	2,500	6

Instructions:

 

1. Compute the depreciation per year for each asset.
2. Compute de rate / Composite life of depreciation per year to be applied to the plant assets under the composite method.
3. Compute the depreciation using composite method.

Problem 3:

 

On January 1, 2012, a machine was purchased for $ 90,000.  The machine has a estimated salvage value of $ 6,000 and useful life of 5 years. It can operate for 100,000 hours. The machine operate as follows:

2012 - 20,00o hours

2013 _  25,000 hours

2014 - 15,000 hours

2015 - 30,000 hours

2016  _10,000 hours

 

Instructions: 

 

1. Compute the annual depreciation over the machine life assuming December 31 year end for each of the following depreciation methods:

• Units of output
• Doble declining balance

1. Assume a fiscal year end on September 30.  Compute the depreciation and the book value at end for the following periods:

• September 30, 2012
• December 31, 2012
• September 30, 2013
• December 31, 2013
• September 30, 2014