Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 10.14BE
To determine
Interest Capitalization:
Interest capitalization refers to the interest amount that is added to the cost of the long-term asset. Such interest capitalization amount includes the interest amount of the debt which was financed for acquiring the asset.
To Calculate: The amount of interest capitalized for the year, using specific interest method.
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Required:
Calculate the amount of interest capitalized for 2024.
E 10-24 Interest capitalization LO10-7
On January 1, 2024, the Highlands Company began construction on a new manufacturing facility for its own use. The building was
completed in 2025. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the
construction loan, Highlands had the following debt outstanding throughout 2024:
$5,000,000,
$3,000,000,
Construction expenditures incurred during 2024 were as follows:
January 1
March 31
June 30
12% bonds
8% long-term note
September 30
December 31
$ 600,000
1,200,000
800,000
600,000
400,000
Required:
Calculate the amount of interest capitalized for 2024 using the specific interest method.
Page 554
Problem 25-4 (IAA)
Molave Company had the following outstanding loans during
2020 and 2021.
Specific construction loan
General loan
3,000,000
25,000,000
10%
12%
The entity began the self-construction of a new building on
January 1, 209 and the building was completed on June 30,
2021. The following expenditures were made:
1, 2020
1, 2020
December 1, 2020
1, 2021
4,000,000
5,000,000
3,000,000
6,000,000
January
April
March
Required:
1. Compute the cost of the new building on December 31,
2020 and June 30, 2021.
2. Compute the interest.expense for 2020 and 2021.
Problem 6-12 Matching asset mix and financing plans (LO6-3]
Colter Steel has $5,100,000 in assets.
$ 2,200,000
Temporary current assets
Permanent current assets
1,560,000
1,340,000
$ 5,100,000
Fixed assets
Total assets
Short-term rates are 12 percent. Long-term rates are 17 percent. Earnings before interest and taxes are $1,080,000. The tax rate is 40
percent.
If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing,
what will earnings after taxes be?
Earnings after taxes
Chapter 10 Solutions
Intermediate Accounting, 10 Ed
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Prob. 10.8BECh. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.18BECh. 10 - Prob. 10.19BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.21BECh. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.30ECh. 10 - Prob. 10.31ECh. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.1PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6DMPCh. 10 - Prob. 10.7DMPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9DMPCh. 10 - Prob. 10.11DMPCh. 10 - Prob. 10.13DMPCh. 10 - Prob. 10.15DMPCh. 10 - Prob. 10.16DMP
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