Early in its fiscal year ending December 31.2016. San Antonio Outfitters finalized plans to expand operations. The first stage w
as completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased for $840,000 San Antonio paid S220,000 and s*gunned a noninterest bearing note requiring the company to pay the remaining $620,000 on March 28. 2018 An interest rate of 10% properly reflects the time value of money for this type of loan agreement Title search, insurance, and other closing costs totaling $22,000 were paid at closing.
May 1 $1,500,000
July 30 1,600,000
September 1 1,020,000
October 1 1,020,000
During April, the old building was demolished at a cost of $72,000, and an additional $52,000 was paid to clear and grade the land. Construction of a new budding began on May 1 and was completed on October 29. Construction expenditures were as follows: (VODSL. Pivot(S1. FAD of $1 and PVAD of $1) (Use appropriate factors) from the tables provided.)
San Antonio borrowed $3,000,000 at 10% on May 1 to help finance construction. This loan, plus interest, will be paid in 2017. The company also had the flowing debt outstanding throughout 2016:
$2,200,000 8% long-term node payable.
$4,200,000 5% long term bonds payable.
In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $620,000. The fair values of the equipment and the furniture and fixtures were $468,000 and $252,000. respectively. In December. San Antonio paid a contractor $295,000 for the construction of parking lots and for landscaping
Required: Determine the initial values of the various assets that San Antonio acquired or constructed during 2016. The company uses the specific interest method to determine the amount of interest capitalized on the building construction.
How much interest expense will San Antonio report in its 2016 income statement?
May 1 $1,500,000
July 30 1,600,000
September 1 1,020,000
October 1 1,020,000
During April, the old building was demolished at a cost of $72,000, and an additional $52,000 was paid to clear and grade the land. Construction of a new budding began on May 1 and was completed on October 29. Construction expenditures were as follows: (VODSL. Pivot(S1. FAD of $1 and PVAD of $1) (Use appropriate factors) from the tables provided.)
San Antonio borrowed $3,000,000 at 10% on May 1 to help finance construction. This loan, plus interest, will be paid in 2017. The company also had the flowing debt outstanding throughout 2016:
$2,200,000 8% long-term node payable.
$4,200,000 5% long term bonds payable.
In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $620,000. The fair values of the equipment and the furniture and fixtures were $468,000 and $252,000. respectively. In December. San Antonio paid a contractor $295,000 for the construction of parking lots and for landscaping
Required: Determine the initial values of the various assets that San Antonio acquired or constructed during 2016. The company uses the specific interest method to determine the amount of interest capitalized on the building construction.
How much interest expense will San Antonio report in its 2016 income statement?
1 answer:
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