QUESTIONS E10-7, P10-8
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e10-7_p10-8.docxConstruction loan—12% interest, payable semiannually, issued December 31, 2013
Short-term loan—10% interest, payable monthly, and principal payable at maturity on May 30, 2015
Long-term loan—11% interest, payable on January 1 of each year. Principal payable on January 1, 2018
$2,000,000 1,400,000 1,000,000
(a) Assume that Harrisburg completed the office and warehouse building on December 31, 2014, as planned at a total cost of $5,200,000, and the weighted-average amount of accumulated expendi- tures was $3,600,000. Compute the avoidable interest on this project.
(b) Compute the depreciation expense for the year ended December 31, 2015. Harrisburg elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $300,000.
P10-8 (Nonmonetary Exchanges) Holyfield Corporation wishes to exchange a machine used in its operations. Holyfield has received the following offers from other companies in the industry.
· 1.Dorsett Company offered to exchange a similar machine plus $23,000. (The exchange has commercial substance for both parties.)
· 2.Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
· 3.Liston Company offered to exchange a similar machine, but wanted $3,000 in addition to Holyfield’s machine. (The exchange has commercial substance for both parties.)
· In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay $93,000 in addition to trading in its old machine.
|
|
Holyfield |
Dorsett |
Winston |
Liston |
Greeley |
|
Machine cost |
$160,000 |
$120,000 |
$152,000 |
$160,000 |
$130,000 |
|
Accumulated depreciation |
60,000 |
45,000 |
71,000 |
75,000 |
–0– |
|
Fair value |
92,000 |
69,000 |
92,000 |
95,000 |
185,000 |
· Instructions
· For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.
