Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $3,000,000, 8% note $5,000,000, 4% bonds Construction expenditures incurred were as follows: July 1, 2018 September 30, 2018 November 30, 2018 January 30, 2019 $ 660,000 930,000 930,000 870,000 The company's fiscal year-end is December 31. Required: Calculate the amount of interest capitalized for 2018 and 2019.

Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $3,000,000, 8% note $5,000,000, 4% bonds Construction expenditures incurred were as follows: July 1, 2018 September 30, 2018 November 30, 2018 January 30, 2019 $ 660,000 930,000 930,000 870,000 The company's fiscal year-end is December 31. Required: Calculate the amount of interest capitalized for 2018 and 2019.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....

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Hawkins Corporation began construction of a motel on March 31, 2021. The project was completed on April 30, 2022. No new loans were required to fund construction. Hawkins does have the following two interest-bearing liabilities that were outstanding throughout the construction period:$5,100,000, 6% note$14,540,000, 10% bondsConstruction expenditures incurred were as follows: March 31, 2021 $ 3,910,000 June 30, 2021 5,910,000 November 30, 2021 1,782,000 February 28, 2022 2,910,000 The company’s fiscal year-end is December 31.Required:Calculate the amount of interest capitalized for 2021 and 2022. (Round weighted average interest rate to 2 decimal places and final answers to the nearest whole dollar.)
On January 1, 2024, the company obtained a $3 million construction loan with a 11% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2024 and 2025. The company’s other interest-bearing debt included two long-term notes of $4,800,000 and $6,800,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.
Additional relevant information:1. Accumulated depreciation is a contra account for all the depreciable assets. Depreciation on these assets totaled $2,200 for the year.2. On January 1, 2016, the company issued 10% bonds with a face value of $5,000 at 106. Interest was paid semiannually on June 30 and December 31. The bonds mature on January 1, 2021. Straight-line amortization is used for bond discount or premium. Bond interest expense was $440.3. Land was purchased for $3,200 during the year.4. Two hundred shares of common stock were issued for delivery equipment valued at $2,900 and office equipment valued at $3,100.5. Twenty shares of stock were issued as a stock dividend. The market price per share was $42.6. Office equipment with a cost of $1,000 and a book value of $300 was sold for $50.7. Fifty shares of its own common stock were reacquired by the company as treasury stock. The company purchased the shares for $40 per share.8. One hundred shares of Scan House Company stock were…
Blue Corporation issued a 10 year bonds on January 1, 2019. Costs associated with the bond issuance were P1, 600,000. Blue Corporation uses the straight line method to amortize bond issue costs. Prepare the December 31, 2019 entry to record the 2019 bond issue cost amortization.
BC Corp. issued callable bonds on January 1, 2021. The bonds pay interest annually on December 31 each year. BC's accountant has prepared the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 01/01/2021 $ 104,212 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 12/31/2022 7,000 6,208 792 102,673 12/31/2023 7,000 6,160 840 101,833 12/31/2024 7,000 6,110 890 100,943 12/31/2025 7,000 6,057 943 100,000 What is the annual market interest rate on the bonds? Select one: a. 6% b. 3% c. 12% d. 3.5% e. 7%
The following transactions pertain to the general borrowings made during 2021 by Owshi Company in connection with the construction of the company’s new warehouse: • 8% bank loan- $2,400,000 • 6% short-term note- $1,600,000 • 8% long-term note- $2,000,000 The construction started on January 1, 2021 and the warehouse was completed on December 31, 2021. Expenditures on the warehouse were as follows: • January 1- $400,000 • March 31- $1,000,000 • June 30- $1,200,000 • September 30- $1,000,000 • December 31- $400,000 How much is the capitalizable borrowing cost of Owshi Company?
BC Corp. issued callable bonds on January 1, 2021. The bonds pay interest annually on December 31 each year. BC's accountant has prepared the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 01/01/2021 $ 104,212 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 12/31/2022 7,000 6,208 792 102,673 12/31/2023 7,000 6,160 840 101,833 12/31/2024 7,000 6,110 890 100,943 12/31/2025 7,000 6,057 943 100,000 What is the annual market interest rate on the bonds?
Noel Bank loaned 9,000,000 to a borrower on January 1, 2017. The terms of the loan were payment in full on January 1, 2022, plus annual interest payment at 12%. The debtor paid interest on January 1, 2018 as scheduled. However, due to financial setbacks, the debtor was unable to pay interest on 2019. BPI accrued interest on Dec. 31, 2018 but did not continue to accrue interest for 2019 due to considered impairment of the loan. On December 31, 2019, BPI projected these cash flows: December 31, 2020 - P 1,500,000 December 31, 2021 - 2,000,000 December 31, 2022 - 3,000,000 December 31, 2023 - 2,500,000 The present value of 1 at 12% is as follows: For 1 period - 0.8929 For 2 periods - 0.7972 For 3 periods - 0.7118 For 4 periods - 0.6355 How much should be recognized as interest income for 2020?
Noel Bank loaned 9,000,000 to a borrower on January 1, 2017. The terms of the loan were payment in full on January 1, 2022, plus annual interest payment at 12%. The debtor paid interest on January 1, 2018 as scheduled. However, due to financial setbacks, the debtor was unable to pay interest on 2019. Noel Bank accrued interest on Dec. 31, 2018 but did not continue to accrue interest for 2019 due to considered impairment of the loan. On December 31, 2019, Noel Bank projected these cash flows: December 31, 2020 - P 1,500,000 December 31, 2021 - 2,000,000 December 31, 2022 - 3,000,000 December 31, 2023 - 2,500,000 The present value of 1 at 12% is as follows: For 1 period - 0.8929 For 2 periods - 0.7972 For 3 periods - 0.7118 For 4 periods - 0.6355 How much is the impairment loss to be recognized on December 31, 2019?
On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.
On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.