Indra TRichy Vijayakumar Chapter 10 Brief Exercises Date 2)

Amount Cap. Per Wt Avg- Acc. Exp 1-Mar 1,800,000 5/6 1,500,000 1-Jun 1,200,000 3/5 700,000 31-Dec 3,000,000 6,000,000 2,200,000 Principal Interest 2,000,000 200,000 3,500,000 385,000 5,500,000 585,000 11%

3) 10%, 5 Yr note 11%, 4 Yr note Weigthed-avg interest rate 4) Wt Avg-Acc. Exp

Interest Rate Avoid. Int. rate 1,000,000 12% 120,000 1,200,000 11% 127,636 2,200,000 247,636

5)

PVF(10%,4yr) * 80,000 54,640.80 Present Value 25,359.20 Discount on Note Truck Disc. On Note Pay. Notes Payable 54,641 25,359 80,000 Fair Values % of Total Cost 60,000 1/6 220,000 3/5 80,000 2/9 360,000 Alloc. Amt 315,000 52,500 315,000 192,500 315,000 70,000 315,000

6) Land Bldg. Equip.

13) a. Capitalized b. Capitalized c. Expensed d. Capitalized e. Capitalized Exercises 1) Land a. b. c. d.

Land Improv.

Bldgs. 275,000

Others (275,000) (notes pay)

10,000 7,000

Indra TRichy Vijayakumar e. f. g. h. i. j. k. l. m. n. o. p. 2) Cost allocation Land Land Razing costs Salvage Legal Land survey Factory plans Title Insurance Liab Insu Cont. Const Interest 450,000 42,000 (6,300) 1,850 2,200 65,000 1,500 900 2,740,000 170,000 2,978,100 Bldgs. 6,000 (1,000) 25,000 50,000 4,000 11,000 (5,000) 13,000 19,000 14,000 3,000

200,000 9,000

489,050 7) a.

Wt.Avg Expen Const, 12%

3,800,000 Principal 2,000,000 1,800,000

Interest 12% 10% 240,000 186,923 426,923

Wt.Avg Int 10% 11% 10.38% b. Actual interest Capital. Int Cost of Bldg. Total Cost Dep Exp 1,600,000 1,000,000 2,600,000 510,000 426,923 5,200,000 5,626,923 177,564 160,000 110,000 270,000

24) a.

Dep. Exp

48,000

Indra TRichy Vijayakumar Acc. Dep-Machine Cash Acc. Dep - Machine Loss on disposal Equipment b. Dep. Exp Acc. Dep-Machine Cash Acc. Dep - Machine Equipment Gain on disposal c. Dep. Exp Acc. Dep-Machine Contribution expense Acc. Dep - Machine Machine Gain on disposal 42,000 42,000 1,100,000 402,000 1,300,000 202,000 630,000 408,000 262,000 1,300,000 18,000 18,000 1,040,000 378,000 1,300,000 118,000 48,000

Questions 1) a. b. c. 5)

Characteristics of plant assets Accquired for use in operations and not resale Long-term nature and depreciated Possess physical subatance

Assign no fixed overhead indirect overhead is fixed in nature; it does not increase as a result of construction of one's own plant(overstates i Assign a portion of all overhead to construction proces Full costing approach , cost is attahced to all products and assets manufactured (understates initial cost and futur Land for the site of its new manufacturing plant is accounted as property,plant and equipment And the other held for speculation is accounted under investment Assets that are in use or ready for intended use and assets not used for earning activites of the firm \ Avoidable interest; this is calculated by mutliplying the interest rate by weighted average expenditures The interest to be capitalized is the lower of avoidable interest or actual interest The total interest cost incurred during the period should be disclosed, indicating the portion capitalized and the portion charged to expense. Interest revenue should not be offset against the interest cost but showed in the other revenue section of the income statement

7)

9) 10)

11)

Problems 8) 1 a. Holyfield Cash Acc.Depn- Machine Machine Loss on excahnge of machinery Machine b. Dorsett Acc.Depn- Machine Machine Loss on excahnge of machinery Machine Cash 2 a. Holyfield Acc.Depn- Machine Machine

23,000 60,000 69,000 8,000 160,000

45,000 92,000 6,000 120,000 23,000

60,000 92,000

Loss on excahnge of machinery Machine b. Winston Acc.Depn- Machine Machine Gain on excahnge of machinery Machine 3 a. Holyfield Acc.Depn- Machine Machine Loss on excahnge of machinery Machine Cash Liston Cash Acc.Depn- Machine Machine Gain on excahnge of machinery Machine 4 a. Holyfield Acc.Depn- Machine Machine Loss on excahnge of machinery Machine Cash Greeley Cash Machine Inventory Sales Cost of goods sold Inventory

8,000 160,000

71,000 92,000 11,000 152,000

60,000 95,000 8,000 160,000 3,000

b.

3,000 75,000 92,000 10,000 160,000

60,000 185,000 8,000 160,000 93,000

b.

93,000 92,000 185,000 130,000 130,000

e's own plant(overstates income for the period)

ates initial cost and future allocation)

of the firm \

e expenditures