accounting questions

| January 30, 2017

Question

Long-term Liabilities

LTL-2

P&P Products issued $1,800,000 of face value bonds on April 1, 2012. The bonds were sold for $1,908,000. They pay 8% interest each year on December 31, and come due in 10 years from their date of January 1, 2012. The company uses the effective interest method to amortize any premium or discount. The market rate is 6%.

Required:

Prepare a bond amortization schedule showing the interest expense, interest payable/cash amount of amortization and carrying value of the bond for the first two years. Prepare entries for the issuance of the bonds and payment of interest for 2012 and 2013.

LTL-3

On January 1, 2012, P&P Products purchased $1,000,000 of the five-year, 8% bonds of Delta Products in the open market for $960,000. Delta Products is a wholly owned subsidiary of P&P Products. The bonds are dated and were issued by Delta Products on January 1, 2010. The bonds pay interest every January 1 and July 1. The effective interest method is used for amortization purposes. The market rate is 10%.

Required:

Make any necessary entries on Delta Products books

Property, Plant, and Equipment

PPE-2

Background:

P& P Products is relocating their Human Resource department to an unused space that is closer to the main administration building. The 4,000 square foot space is empty and has not been used in several years. Jane, the VP of personnel, is overseeing the conversion and relocation of the HR Department. P&P Products’ maintenance department will perform the work. Jane has asked George, the maintenance foreman, to prepare a list of what needs to be completed in order to make the space ready for occupancy. George has provided the following list of tasks and their estimated costs. Assume that contractors will perform the construction and that the prices given include labor costs:

1. Painting (the current walls have paint peeling)-$15,000

2. Removal of old asbestos in the ceiling-$12,000

3. Replacing the wood floors with tile to increase the life of the space-$34,000

4. Installing wiring for computers-$18,000

5. Installing modular units for work space-$124,000

Problem:

In addition to the costs listed above, Jane asked the IT department to give her a price list for new computer equipment.

The following information was provided:

a. 14 new computers-$140,000. Additionally, P&P Products would have to pay $2,000 for freight and 6% tax on $140,000. The estimated useful life is 5 years, with a 5% salvage value. The computers are listed as a single unit for financial reporting purposes.

b. 10 existing computers, with a total trade-in value of $10,000 will be traded for the new computers. The computers are treated as a single unit for financial reporting purposes. These computers have an original cost of $80,000 and a book value of $8,000. The remainder of the purchase price of the new computers will be paid in cash.

c. Additional IT personnel to support the increased workload created by the HR department-$200,000 annually. This amount includes fringe benefits and taxes.

Required:

Prepare the potential journal entries for the above items (a, b, c only) assuming that the exchange is considered to lack commercial substance.

PPE-5

P&P Products began construction on a warehouse that had a total estimated cost of $4,000,000. Construction began on January 2, 2012. Expenditures for 2012 were made as follows:

January 2, $1,000,000

March 1, $900,000

July 1, $400,000

October 1, $800,000

P&P Products financed the project by issuing $1,000,000 in stock at the beginning of 2012, and in 2011, obtained a construction loan for $1,200,000 at an interest rate of 8%. Additionally, the company had a $1,000,000, 9% note payable that was obtained in 2010 and a $2,000,000, 11% note payable that was obtained in 2009. Both notes come due in 2016. The warehouse was completed in 2013.

Required:

a. Calculate the weighted average accumulated expenditures for the year 2012

b. How much is the avoidable interest in the year 2012?

c. How much is the actual interest in the year 2012?

d. Prepare the entry to record the interest capitalized in 2012.

Get a 30 % discount on an order above $ 50
Use the following coupon code:
COCONUT
Order your essay today and save 30% with the discount code: COCONUTOrder Now
Positive SSL