Question 5

On March 1, 2012, Donner Company began construction on an office building. The following expenditures were incurred for construction:

Date Expenditures

3/1/12 $150,000

4/1/12 200,000

5/1/12 300,000

12/31/12 100,000

The office was completed and ready for occupancy on April 1st, 2013. To help pay for construction, $300,000 was borrowed on January 1, 2012, on an 8%, three-year note payable. Other than the construction note, the only debt outstanding during 2012 was:

• $500,000, 8%, note payable
• $1,000,000, 6% bond payable

A. Calculate average accumulated

expenditures for 2012: $_____________________

B. Calculate avoidable interest for 2012: $_____________________

C. Prepare the journal entry to capitalize

interest costs for 2012

D. Calculate the total capitalized value of

the office building at 12/31/12: $____________________

Question 4

Rexburg Inc. reports the following information as of December 31 of the current year:

Balance in Allowance for Market Decline: $5,000

(unadjusted since December 31 of prior year)

Inventory Item	Cost	Replacement Cost	NRV	NRV less Normal Profit
Item A.1	63,000	64,000	71,000	66,000
Item A.2	25,000	23,000	26,000	24,000
Major Group A	88,000	87,000	97.000	90,000
Item B.1	41,000	44,000	54,000	50,000
Item B.2	40,000	38,000	41,000	37,000
Major Group B	82,000	72,000	95,000	87,000
All Inventory Items	170,000	159,000	192,000	177,000

1. What is the value of ending inventory? What journal entry should Rexburg make to reflect the lower-of-cost adjustment for the current year, assuming that LCM is applied on an individual item basis?
2. What is the value of ending inventory? What journal entry should Rexburg make to reflect the lower-of-cost adjustment for the current year, assuming that LCM is applied on a major group basis?