A. Nonmonetary Exchange Review Problem Arnold Company recently entered into an exchange with Palmer Company. Arnold traded
Question:
A. Nonmonetary Exchange Review Problem Arnold Company recently entered into an exchange with Palmer Company. Arnold traded one of its lathes in exchange for a punch press from Palmer Company. The lathe's book value was $80,000 (original cost of $200,000 less $120,000 in accumulated depreciation) and its fair value was $90,000. The book value of the punch press was $110,000 (original cost of $180,000 less $70,000 of accumulated depreciation). The fair value of the punch press was $100,000. Arnold paid $10,000 to complete the exchange, and the exchange has commercial substance.
Required:
1. Prepare the journal entry that Arnold would record for the exchange.
2. Prepare the journal entry that Palmer would record for the exchange.
B. Capitalized Interest Review Problem On January 1, 2018, the Gilligan Company began construction on a new manufacturing facility for its own use. The building was completed in early 2019. Throughout 2018, the company had interest-bearing debt, which included two long-term notes of $4,000,000 and $6,000,000 with annual interest rates of 6% and 8%, respectively. Construction expenditures incurred during 2018 were as follows:
Date Amount
January 1 $500,000
March 1 600,000
July 31 480,000
September 30 600,000
December 1 400,000
Required:
1. Calculate the amount of interest that Gilligan will capitalize related to the construction (notice that there is no construction-specific debt in this problem).
2. Assuming no other expenditures than those listed above, at what value should Gilligan record the building when construction is complete?
Dynamic Business Law The Essentials
ISBN: 978-0073524979
2nd edition
Authors: Nancy Kubasek, Neil Browne, Daniel Herron