Accounting Essay
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Quiz 21. Largo Inc. ended 20×5 by capitalizing interest of $32,000 on the construction of equipment for its own use. During 20×5 Largo also spent $560,000 on qualifying construction expenditures. The 12/31/x5 balance in construction in progress therefore is $592,000. In 20×6 Largo spent $420,000 more in qualifying construction expenditures evenly throughout the year. The equipment is not yet complete as of 12/31/x6. Compute AAE for 20×6 for the purpose of capitalizing interest for 20×6.a. 1,012,000b. 770,000*c. 802,000d. 210,000e. 790,000592,000 + 420,000/2 = 802,0001. Self-Made Inc. completed the construction of its own warehouse at the end of year 1. Total costs incurred are as follows:____ Materials, $20,000____ Labor, 60,000____ Overhead, 40,000____ Capitalized interest, 25,000In addition to the above information, the firm signed a mortgage note with a one year term on 1/1/year 2. $10,000 of interest was incurred during year 2 on that note which was then retired at the end of year 2. The market value of the building was $210,000 upon completion at the end of year 1. What is the final capitalized amount for the warehouse, at 12/31/year 1?
*a. 145,000b. 210,000c. 155,000 d. 120,000e. 80,00020,000 + 60,000 + 40,000 + 25,000 = 145,000 < 210,000 (so no loss). The 10,000 interest after the building is complete is expensed.1. In 20x5 a firm capitalized $67,000 of software development costs for a new product. 20x5 is the first year the firm marketed the product; amortization of $17,000 was recorded at the end of 20x5. During 20x6 the firm reported sales of $230,000 for the product and estimates (at year-end) that future sale will total $330,000 over the remaining product life of two years. Compute amortization of software development costs for 20x6.*a. 20,536b. 16,667c. 25,000d. 34,849e. 18,56250,000 is the bv of capitalized sw costs at the beginning of 20x6 (67,000 – 17,000)The 2 amort amounts for 20x6 are:Based on years: 50,000(1/3) = SL amortization = 16,667Based on revenue: 50,000[230,000/(230,000 + 330,000)] = revenue amortization = 20,536The largest of the 2 is recognized each year.1. At the beginning of 20x4, Quell began constructing technical equipment for its own use. Debt outstanding the entire year:___ 5%, $40,000 loan to finance the construction of the equipment