Complete both problems.
Show all calculations.
Problem 1 (From a previous exam)
XYZ’s beginning balance of Assets under Construction was $5
million on January 1, 2011. On July 1,
2011 XYZ paid $2 million more to its contractors and on October 1, they paid an
additional $8 million. XYZ has no
specific borrowings related to the construction, but has the following loans
outstanding unrelated to the construction project:
9% loan from KLM bank
borrowed on April 1, 2010 $5
million
15% loan from FGD
bank borrowed on Jan 1, 2009 $10 million
Required: Show
XYZ’s capitalized interest disclosure in the footnotes for the year ended
December 31, 2011. Be sure to clearly
mention the amount capitalized.
Show all calculations.
Problem 2 (adapted from a previous exam)
Picard Enterprises purchased a spaceship on November 1, 2014
for $260 million. Test runs and weapon
system checks costing $60 million were performed to prepare the spaceship for
duty. Picard estimates that the ship will last 4 years and can be sold at a
salvage value of $80 million. Picard
uses the double declining balance method of depreciation for financial
reporting and applies the half-year convention to assets placed in service in
the middle of a fiscal year.
Required:
1.
Give Picard’s adjusting journal entry to record
depreciation expense for the year ended December 31, 2017.
2.
What is the net book value of the spaceship on
December 31, 2017?
