1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Flura [38]
2 years ago
9

Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage

was
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 by
paying $370,000 immediately and signing a noninterest-bearing note requiring the company to pay $770,000 on March 28, 2023. An
interest rate of 8% properly reflects the time value of money for this type of loan agreement. Tide search, insurance, and other closing
costs totaling $37.000 were paid at closing
At the end of April, the old building was demolished at a cost of $87,000, and an additional $67.000 was paid to clear and grade the
land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows
(FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
May 1
July 30
September 1
October 1
$3,750,000
2,350.000
1,920,000
2,820.000
San Antonio borrowed $6,100,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The
company also had a $6,950,000, 8% long-term note payable outstanding throughout 2021
In November, the company purchased 10 identical pieces of equipment and office furniture and fortures for a lump-sum price of
$770 000. The fair values of the equipment and the fumiture and fixtures were $522,000 and $348,000, respectively. In December, San
Antonio paid a contractor $370,000 for the construction of parking lots and for landscaping.
Required:
1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the
specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28
and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the
amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Determine the initial values of the variou assets that San Antonio acquired or constructed during 2021. The company uses
the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures
on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures
for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on
March 28.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
Business
1 answer:
WARRIOR [948]2 years ago
6 0

Answer:

1) assets basis:

land = $1,221,151

equipment = $462,000

furniture and fixtures = $308,000

parking lots and landscaping = $370,000

building = $11,241,600

2) interest expense:

interest on notes payable issued to buy land = $52,812

interest expense on other notes payable = $479,733

total = $532,545

Explanation:

the basis of the land (not depreciable):

  • $370,000 paid in cash
  • PV of notes payable = $770,000 / 1.08² = $660,151
  • closing costs = $37,000
  • demolition of existing structures = $87,000
  • land clearing and grading = $67,000
  • total = $1,221,151

Demolition costs as well as land grading and clearing add to the basis of the land, they are not included as part of construction costs. Therefore, they cannot be capitalized and added to the building's basis. The land is one asset and the building is a separate one, you cannot mix them. Only construction costs incurred when building the building (I don't know how else to say it) can be considered as accumulated expenditures for interest capitalization. The same applies to land improvements, they cannot be included in the construction's accumulated expenditures, they are separate assets.

interest expense on notes payable = $660,151 x 8% = $52,812

basis of equipment, furniture and fixtures (depreciable assets):

  • equipment = ($522 / $870) x $770,000 = $462,000
  • furniture and fixtures = ($348 / $870) x $770,000 = $308,000

parking lots and landscaping (depreciable land improvements):

  • $370,000

total building construction expense during 2021:

  • May 1 : $3,750,000
  • July 30:  $2,350.000
  • September 1:  $1,920,000
  • October 1 : $2,820.000
  • total = $10,840,000

weighted construction expenditures 2021:

  • May 1 : $3,750,000  x 8/12 = $2,500,000
  • July 30:  $2,350.000  x 6/12 = $1,175,000
  • September 1:  $1,920,000  x 4/12 = $640,000
  • October 1 : $2,820.000 x 3/12 = $705,000
  • total = $5,020,000

capitalized interests = $5,020,000 x 8% = $401,600

basis of building:

  • total construction expenses = $10,840,000
  • capitalized interests = $401,600
  • total = $11,241,600

interest expense on other notes payable = ($6,100,000 x 8% x 8/12) + ($6,950,000 x 8%) - $401,600 = $479,733.33 ≈ $479,733

     

You might be interested in
Jack and Mary, a married couple, report taxable income of $280,000, which includes $200,000 from Jack's solely owned S corporati
Strike441 [17]

Answer:

$32,140

Explanation:

The QBI  on $280,000(57.3% of Taxable income)                  $160,700

Eligible Deduction of 20% on QBI                                            $32,140

4 0
2 years ago
Please help I will give branniest and I upped the points
9966 [12]

Answer:

which country r u from?cuz I would have to research the banks according to your country.

3 0
2 years ago
The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104.25 and a bid price of 104.125.
Andreas93 [3]

As a seller we would receive $1,041.25

<u>Solution:</u>

You may receive the bid price of the dealer, 104.125\% of $1,000, or $1,041.25

Prices of treasury bonds are expressed as par value amounts.  

The quote price of 104:25 means that the bond is priced at (104 + \frac{25}{100})\%= 104.25\% of the par value.  

Therefore, if the debt is $1,000, the dollar values to be charged by the borrower should be 1,000\times104.25\% = \$1,041.25

5 0
2 years ago
True or False: An interest-bearing account is an account that generates interest income on the available balance in the account.
Korvikt [17]

Answer:

False

Explanation:

Interest Bearing Account is an account which generates interest income over a specified period of time. Certificate of Deposit is an example for the interest bearing account. So, simply saying that An interest-bearing account is an account that generates interest income on the available balance in the account is wrong.

6 0
3 years ago
Problem Page Watson Company's employees earn $290 per day and are paid on Friday for a five-day work week. This year, December 3
vredina [299]

Answer:

<u>inocme statment:</u>

wages expense: understate

<u>net income</u> overstate

<u>blanace sheet</u>

wages payable: understate

Retained Earnings: overstate

Explanation:

If the adjusting entry is not made, then the expenses will be lower than it should.

Thereofre the net income will be overstate as there are more expenses but weren't recorded.

the balance sheet will not represent accurate the liabilities as there is wages payable which are not recorded.

also, in the blaance sheet the Retained Earnings account will be overstate as it include the net income which is overstate.

5 0
3 years ago
Other questions:
  • Gugenheim, Inc., has a bond outstanding with a coupon rate of 5.7 percent and annual payments. The yield to maturity is 6.9 perc
    15·1 answer
  • The supply and demand curves reflect data for a specific brand of sunglasses. Which circumstance can explains the shift of the d
    10·1 answer
  • Suppliers will supply more of a good when the price of that good rises because the opportunity cost of producing that good has r
    10·1 answer
  • Hong kong clothiers reported revenue of $5,000,000 for its year ended december 31, 2016. accounts receivable at december 31, 201
    15·1 answer
  • Brent Bishop is the vice president of operations for Southern Sweets Bakery. He drives a 2017 Toyota Prius Prime as his company
    10·1 answer
  • Which of the following is necessary to create an agency relationship? a. consideration b. an agent with contractual capacity c.
    11·1 answer
  • The following are budgeted data: January February March Sales in units 16,000 22,000 19,000 Production in units 19,000 20,000 18
    9·1 answer
  • How does feedback of players influence the development of a game?
    15·1 answer
  • When a smaller country with fewer resources specializes its production and gains access to larger, international markets, this c
    7·1 answer
  • marginal revenue for the perfectly competitive seller is blank price, whereas for the monopolist it is blank price
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!