9(a) Flashcards
Wilson Co. purchased land as a factory site for $1,350,000. Legal fees of $5,220 were paid for the title investigation and making the purchase. Architecture fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the building that should be recorded by Wilson Co. is
$4,521,360
$46,800 + 3,900 + 15,660 + 4,200,000 + 255,000
Mendenhall Corporation constructed a building at a cost of $14,000,000. WAAE were $5,600,000, and actual interest was $560,000, and avoidable interest was $280,000. If the salvage value is $1,120,000, and the useful life is 40 years, depreciation expense for the first full year using the straight line method is
$329,000
($14,000,000 + 280,000 - 1,120,000) / 40
During 2025, Kimmel Co. incurred WAAE of $1,600,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2025 was a $2,000,000, 10%, 5 year note payable dated Jan 1, 2015. What is the amount of interest that should he capitalized by Kimmel during 2025?
$160,000
WAAE * avg interest rate (10%)
$1,600,000 * 0.1 = 160,000
if there was more interest and outstanding debts outstanding that would be included and calculated into the avg interest ratw
Richardson Senior Living Company is constructing a new duplex. During the construction, the following were among the costs incurred:
General contractor payments for materials and direct labor $1,000,000
Utility. cost attributable to self-construction 75,000
Supplies costs attributable to self-construction 80,000
Facilities Director Salary (30% of some spent on construction) 85,000
Facilities Director Benefits Charge 17,000
What amount of overhead (variable and fixed) should be allocated to the self construction?
$185,600
$75,000 + 80,000 + (85,000*0.3) + (17,000 * 0.3)
On March 1, 2025, Newton Company purchased land for an office site by paying $2,700,000 cash. Newton began construction on the office building on March 1.
The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed in March 1, 2025 on a 9%, 3 year note payable. Other than the construction note, the only debt outstanding during 2025 was a $1,500,000, 12%, 6 year note payable dated January 1, 2025.
Assume the WAAE for the construction project are $4,350,000. The amount of interest cost to be capitalized during 2025 is
$414,000
(3,600,000 * 0.09) + (750,000 * 0.12)
*4,350,000 - 3,600,000 = 750,000
Worthington Chandler Company purchased equipment for $40,000. Sales tax on the purchase was $2,400. Other costs incurred were freight charges of $600, repairs of $350 for damage during installation, and installation costs of $675. What is recorded as the cost of the equipment?
$43,675
$40,000 + 2,000 + 600 + 675
On March 1, 2025, Newton Company purchased land for an office site by paying $2,700,000 cash. Newton began construction on the office building on March 1. The following payments were made for construction:
Date Expenditures
3-1-25 $1,800,000
4-1-25 $ 2,520,000
5-1-25 $,4,500,000
6-1-25 $ 4,800,000
The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase land $3,600,000 was borrowed on March 1, 2025 on a 9%, 3-yr note payable. Other than the construction note, the only debt outstanding during 2025 was $1,500,000, 12%, 6 yr note payable dated January 1, 2025.
The actual interest cost during 2025 was
$450,000
(3,600,000 * 0.09 * 10/12) + (1,500,000 * 0.12)
Fogelberg Corp. purchased equipment for their diagnostic service division. The invoice price was $230,000. This did not include the 6% sales tax. Transportation costs of $3,600 were incurred to ship the equipment from the factory to Fogelberg’s destination. In addition, part of the wall adjacent to the entry door had to be removed (and then rebuilt) to provide an entrance large enough for the delivery of the equipment for a cost of $1,750. What is recorded as the cost of the equipment?
$249,150
($230,000 + 13,800 + 3,600 + 1,750)
*230,000 * 0.06 = 13,800
Messersmith Company is constructing a building. Construction began in 2025, and the building was completed at 12/31/25. Messersmith made payments to the construction company of $3,000,000 on 7/1, $6,300,000 on 9/1, and $6,000,000 on 12/31. WAAE?
$3,600,000
(3,000,0006/12) + (6,300,0004/12)
the 6,000.000 was made on last day so is not calculated into it
What are 3 things that are part of historical costs of an asset
acquisition price, sales tax, freight and shipping costs to bring the asset to where it will be used
On March 1, 2025, Newton Company purchased land for an office building. Newton began construction on the office building on March 1. The following payments were made for construction:
Date Expenditures
3-1-25 $1,800,000
4-1-25 $ 2,520,000
5-1-25 $,4,500,000
6-1-25 $ 4,800,000
The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed in March 1, 2025 on a 9%, 3 year note payable. Other than the construction note, the only debt outstanding during 2025 was a $1,500,000, 12%, 6 year note payable dated January 1, 2025.
The WAAE during 2025 were
$2,380,000
(1,800,0004/12)+(2,520,0003/12)+(4,500,0002/12)+(4,800,0001/12)
Avoidable interest
portion of total interest cost that would not have been incurred if expenditures for asset construction had not been made.
Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for the title investigation and making the purchase. Architecture fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the land that should be recorded by Wilson Co. is
$1,480,320
$1,350,000 + 120,000 - 8,100 + 5,220 + 3,600 + 9,600
