Question
Questions 1 (17 marks) Part A (10 marks) Early in 2020, DEF Limited engaged a contractor to design and construct a new warehouse. The warehouse
Questions 1 (17 marks) Part A (10 marks) Early in 2020, DEF Limited engaged a contractor to design and construct a new warehouse. The warehouse was completed and ready for use in early 2021. DEF Limited incurred the following expenditures for the construction. March 1, 2020 $ 90,000
April 1, 2020 72,000
May 31, 2020 75,000
July 1, 2020 70,000
December 31, 2020 200,000 DEF Limited had the following debt outstanding on December 31, 2020. 1. 12%, 3-year note to finance the construction of this warehouse, dated January 1, 2020, with interest payable annually on December 31 $ 150,000 2. 12%, 10-year bonds issued at par on December 31, 2015, with interest payable annually on December 31 400,000 3. 9%, 3-year note payable, dated January 1, 2019, with interest payable annually on December 31 200,000 Requirement: A. Advise DEF Limited how to account for the interest incurred related to the warehouse in 2020. Support your answers with detailed calculation. (10 marks) Part B (7 marks) ACB Company purchased computers for administrative use on June 30, 2020 for $31,600 cash. The computers have an estimated useful life of 5 years and a residual value of $4,000. ABC Company adopts the double-declining-balance depreciation method and the cost model to account for the computers. On December 31, 2020, ABC Company exchanged the computers with tablets and paid $8,000 cash. At the time of exchange, the computers had a fair value of $25,000 and the exchange has commercial substance. Requirement: B. Prepare journal entries for ABC Company on December 31, 2020 (7 marks)
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