Question 10 (10 points) On 1/1/17, a company begins the construction of a new building that will be used for operations and will take several years to complete. The company's accountants calculate that the weighted Average Accumulated Expenditures for the year 2017 are equal to $700,000. In addition to their preexisting debt, on 12/31/16, the company borrowed $200,000 specifically to afford expenses related to the construction. Summary information about the company's debt is reported below: OTHER DEBT SPECIFIC CONSTRUCTION DEBT NOTE BOND maturity 3 maturity 5 maturity 10 interest 296 Interest 4% interest 10% inception 12/31/2016 Inception 12/31/2013 Inception 12/31/2012 principal $200,000 principal $600,000 principal $300,000 Interest Interest 31-Dec Interest on Payable on 31-Dec 31-Dec QUESTION: What amount is credited to "Cash" on 12/31/17? NOTE: Do not include the $ symbol in the answer. Also, use the comma to separate the thousands. For example, a correct answer will be "45,000" not "$45,000" or "45000". If your answer is zero, write "O". > Question 11 (8 points) (continued from the previous question) What amount is debited to interest expense on 12/31/172 NOTE: Do not include the $ symbol in the answer. Also, use the comma to separate the thousands. For example, a correct answer will be "45,000", not "$45,000" or *45000". If your answer is zero, write "O" A/ Question 12 (18 points) (continued from the previous question) If the weighted average accumulated expenditures had been $1,000,000 instead of $700,000... (select all that apply - i.e. just one or as many as all of them) on 12/31/17, a lower amount would be debited to interest expense Capitalization of interest could be disallowed by GAAP because the amount could be too high No balance sheet account would be debited on 12/31/17 On 12/31/17, the same amount would be credited to cash Depreciation expense in future years would be lower The 2017 debt-to-equity ratio would be higher The total cash flow reported on the 2017 Statement of Cash Flows would be higher In the 2017 balance sheet, the value of total assets would be smaller On 12/31/17, cash would be credited for an amount $300,000 higher Question 13 (16 points) (continued from the previous question) Suppose that the weighted average accumulated expenditures stayed $700,000, but the principal of the specific construction debt was $800,000 instead of $200,000, and that its interest rate was 1% instead of 2%. Which of the following statements are correct? (select all that apply - i.e., just one or as many as all of them) A. The amount credited to Cash on 12/31/17 would be higher than the main case (i.e. than in question #10) No interest could be capitalized according to GAAP O No interest expense would be debited No balance sheet account would be credited on 12/31/17 on 12/31/17, both an income statement account and a balance sheet account would be debited F. The amount debited to interest expense would be the same as the main case (.e. as in question #11) G. The total cash flow reported on the 2017 Statement of Cash Flows would be higher than the main case (ie than in question #10) A revenue account would be credited on 12/31/17
