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Dvinal [7]
3 years ago
9

On December 31, 2019, Marigold Inc. borrowed $3,600,000 at 13% payable annually to finance the construction of a new building. I

n 2020, the company made the following expenditures related to this building: March 1, $432,000; June 1, $720,000; July 1, $1,800,000; December 1, $1,800,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,800,000 6-year, 11% note, dated December 31, 2017, interest payable annually $1,920,000 2. March 1, 2020, expenditure included land costs of $180,000 3. Interest revenue earned in 2020 $58,800 Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building. The amount of interest ____________$ Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Debit Credit Date Account Titles and Explanation December 31, 2020
Business
1 answer:
trapecia [35]3 years ago
8 0

Answer:

Interest on borrowed = $237,900

Actual interest paid = $1,351,200

Explanation:

As per the data given in the question,

Marigold Inc. borrowed = $3,600,000 at 13 % payable annually

Expenditure related to the building :

March 1 = $432,000

June 1 = $720,000

July 1 = $1,800,000

December 1 = $1,800,000

As per the formula,

Weighted avg = (Amount × no. of months ) ÷ months in a year

            Amounts        no. of months     months in a year      weighted avg

Mar 1    $432,000            10                         12                        $360,000

June 1  $720,000             7                          12                        $420,000

July 1   $1,800,000           6                          12                        $900,000

Dec 1   $1,800,000           1                           12                        $150,000

Total weighted avg =                                                               $1,830,000

Interest on borrowed = $1,830,000 × 13%

= $237,900  

Actual interest paid :

$3,600,000 × 13% = $468,000

$4,800,000 × 14% = $672,000

$1,920,000 × 11% =$211,200

So, total Actual interest paid = $1,351,200

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On July 1, Raney Corporation purchases 690 shares of its $4 par value common stock for the treasury at a cash price of $9 per sh
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Answer:

Date      Particular                                       Dr.        Cr.

Jul-1       Treasury stock                          $6,210

             Cash                                                         $6,210

Sep-1     Cash                                          $4,840

             Treasury stock                                         $3,960

             Paid-in capital - Treasury stock              $880

Explanation:

Treasury stocks are the company's own shares which is repurchased by the company. It is recorded in treasury shares account which is an contra equity account. I can be reissued or cancelled by the company.

Purchase of Treasury Stock

Treasury Stock = 690 x $9 = $6,210

Sales of Treasury Stock

Cash Receipt = 440 x $11 = $3,300

Treasury Stock = 440 x $9 = $3,960

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Answer:

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2) b. $156,250

Explanation:

1. The computation of net income for 20X9 under the treasury stock method is shown below:-

Net income for 20X9 under the treasury stock method = Janet Operating income + Slider operating income

= $100,000 + $75,000

= $175,000

2. The computation of income assigned to the controlling interest for 20X9 is shown below:-

income assigned to the controlling interest for 20X9 = Janet Operating income + (Slider operating income × Remaining percentage)

= $100,000 + ($75,000 × 75%)

= $100,000 + $56,250

= $156,250

Therefore we have applied the above formulas.

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