Homework SourseCan someone please provide the solutions No explanation need
Can someone please provide the solutions. No explanation needed, just the answers so I can double check my work.
12. Sigma Company suffers a loss to its building in a fire and spends $100,000 on repairs and improvements. It judges that $80,000 of the expenditure replaces long-lived assets lost in the fire, and $20,000 represents improvements to the building. Which of the following is the single journal entry that Sigma Company will make?
a. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
b. Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
c. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
d. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
e. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
16. Firms treat expenditures as assets when they:
a. have acquired rights to the future use of a resource as a result of a past transaction or event.
b. can reliably measure the cost of the expected benefits at the time of initial recognition.
c. can exercise the entity’s right to, or control of, the benefit.
d. can obtain the future service potential and control others’ access to it.
e. all of the above
Clarion Realty
Clarion Realty has decided to construct its own office building. The construction will be partially financed through a construction loan and any remainder will be financed from internally generated funds. The internal accountants have collected the following information concerning the construction.
Average Balance Construction Other
Year Construction Account Debt @ 6% Debt @ 10%
1 $2,000,000 $1,000,000 $500,000
2 $4,000,000 $1,000,000 $250,000
3 $3,000,000 $800,000 $200,000
22. The amount, if any, of capitalized interest cost for Year 1 is
a. $0
b. $50,000
c. $60,000
d. $110,000
e. $170,000
23. The amount, if any, of capitalized interest cost for Year 2 is
a. $0
b. $50,000
c. $60,000
d. $180,000
e. $230,000
33. When a firm constructs its own buildings or equipment:
a. it recognizes the labor, material, and overhead costs incurred as an asset.
b. U.S. GAAP and IFRS require firms to include, or capitalize, interest costs during construction in the cost of a self-constructed asset.
c. it recognizes the labor, material, and overhead costs incurred as a period expense.
d. U.S. GAAP and IFRS require firms to expense interest costs incurred during construction of a self-constructed asset.
e. both choices a and b are correct.
Solution
1) A
both the purchase and improvement can be capitalised and should be debited into asset account.
2) A
3)D
4)D ,
The cost incurred especially for constructing the building can be capitalised.
5)E
