1. Princes Inc. contracted P&P Company to construct a building for $1, 400.000n a Landcosting $100,000 (purchased from the contractor and included in the first payment)Princess Inc. made the following payments to the construction Company during 2012.Jan 1$210,000MarchMayDecTotal$300,00$540,00$450,000$1,500,000Specific Construction Debt15% 3-year note to finance purchase of land and building dated Dec. 31, 2011 with interestpayable annually on Dec. 31Other Debts10%, 5 year note payable with interest payable annually on Dec. 3112%, 10 year bonds with interest payable annually on Dec. 31

**1. Construction Contract and Cost Allocation:** - Princess Inc. entered into a construction…

Answered: 1. Princes Inc. contracted P&P Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Interest Costs During Construction Comprehensive Illustration: On November 1, 2016, Shalla Company contracted Pfeifer Construction Co. to construct a building for $1,400,000 on land costing $100,000 (purchased from the contractor and included in the first payment). Shalla made the following payments to the construction company during 2017 January 1 - $210,000 March 1 - $300,000 May 1 - $540,000 December 31- $450,000 Total: $1,500,000 Interest costs during construction: Pfeifer Construction completed the building, ready for occupancy, on December 31, 2017. Shalla had the following debt outstanding at December 31, 2017 Specific Construction Debt: 1. 15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2016 with interest payable annually on December 31 $750,000 Other Debt: 2. 10% 5-year note payable, dated December 31, 2013 with interest payable annually on December 31 $550,000 3. 12%, 10-year…
Example ABC begins construction on a warehouse on 1/1/19 and completes on 12/31/19 Expenditures on DM, DL & MOH are as follows: 1/1/19 6/30/19 9/30/19 600,000 300,000 100,000 Debt outstanding during the construction period: 1/1/19 1/1/17 1/1/15 2 year note for Construction $500,000, 4% issued a 5 year note $200,000, 3% issued a 20 year bond payable $800,000, 6% 1. Calculation of WAAE (Weighted Average Accumulated Expenditures) 2. Calculation of Avoidable Interest WAAE interest Avoidable interest rate
In 2021, STA. LUCIA Corporation incurred the following expenses for building construction: P3, 000, 000 200, 000 30, 000, 000 15, 000, 000 6.000, 000 P54, 200, 000 1/2/2021 1/3/2021 2/1/2021 4/1/2021 Б/30/2021 Paid for excavation Paid architect 1" payment to contractor 2d payment to contractor Final payment to contractor Total STA. LUCIA did not get any specific borrowing. Its general borrowings are as follows: | 8%, Notes Payable | 9%, Notes payable Total P40, 000, 000 30, 000, 000 P70, 000, 000 42. How much is capitalized cost of borrowing? a. P1, 295, 196 b. P1, 504, 577 c. P2, 590, 392 d. P3, 009, 153
4. The following information pertains to Our Company's self-constructed building project Our Company is building a project for its own use. We have been asked to calculate the amount of interest to be capitalized. 2021 Payments: 1/31/21 2/28/21 Specific construction debt: $900,000, 4%, 5-year note, dated 12/31/20, interest paid annually on 12/31 415,000 500,000 6/1/21 860,000 12/1/21 725,000 Other debt: 2,500,000 $825,000, 5%, annual interest paid 12/31, dated 12/31/20 $1,250,000, 7%, 10 year bonds, dated 12/31/17, interest paid 12/31 How much is the weighted average of the accumulated expenditures? b. How much is the weighted average of the interest rates on other debt? c. How much is the avoidable interest? d. How much is the actual interest? e. How much is recorded as the interest expense? f. How much interest should be capitalized? a.
11 NANGUTANG started constructing a building for its own use on January 1, 2020. NANGUTANG provided the following information related to the construction: Outstanding loans of the Company at January 1, 2020: Interest Rate Amount of loan Interest Cost 5% P10,000,000 P 500,000 10% 20,000,000 2,000,000 Total P30,000,000 P2,500,000 Construction expenditures: July 1, 2020 7,000,000 November 31,2020 3,000,000 December 31, 2020 1,000,000 The amount of borrowing cost that should be charged to profit or loss for the period is? Group of answer choices 340,142 312,375 2,208,450 2,187,625
4. DM, Inc. works on a P10,500,000 contract in 2022 to construct an office building. During 2022, DM, Inc. uses the cost to cost method. At December 31, 2022, the balances in certain accounts were: Construction in progress – P3,780,000 Accounts receivable – P360,000 Billings on construction in process P1,800,000 Contract retention – P180,000 Mobilization fee – P140,000. At December 31, 2022, the estimated cost at completion is P7,350,000. How much is the realized gross profit in 2022? а. 1,102,500 b. 1,062,500 c. 1,242,500 d. 1,134,000
Required: Compute the following, placing your answer in the spaces provided and showing PROBLEMS 361 Supporting computations below: 1 Cash collected by KP on Cincy One during 20x4 2 Actual costs incurred by KP on Cincy One during 20x4 2 On December 31, 20x4, the estimated remaining costs to complete 4. The percentage of Cincy One that was completed during 20x4
PAP-3A McNeil Construction Company is involved in a long-term construction contract to build an office building. The estimated cost is $30 million, and the contract price is $38 million. Additional information follows. Office Building Cash Collections $ 6,000,000 8,000,000 12,500,000 11,500,000 Actual Costs Incurred $ 4,500,000 6,000,000 2011 2012 2013 12,000,000 2014 7,500,000 The project is completed in 2014, and all cash to be received from the contract has been received. Instructions Prepare a schedule to determine the gross profit in each year for the long-term construction con- tract using the percentage-of-completion method.
GGDL Construction Corp. recently acquired the P2 Corp. P2 Corp has incomplete accounting records. On the one particular project, only the information below is available: 2016 2017 2018 Cost incurred during the year 1,000,000 1,250,000 ? Estimated Cost to complete 2,250,000 950,000 - Recognized revenue 1,100,000 ? ? Realized gross profit on contract ? 50,000 (50,000) Contract Price 3,500,000 P2 Corp uses the percentage of completion method and percentage of work completed is determined through surveys of work performed (Engineer’s estimates). Compute the realized gross profit to be recognized in 2016, revenue to be reported in 2017 and cost incurred in 2018. Group of answer choices 250,000; 2,400,000; 2,250,000 100,000; 1,300,000; 1,150,000 1,100,000; 1,300,000; 2,250,000 1,000,000; 2,400,000; 3,400,000
Marie Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan outstanding during 2022 and 2023. The entity began the self-construction of a building on January 1, 2022 and was completed on December 31, 2023. The following expenditures were made during 2022 and 2023: January 1, 2022 4,000,000 April 1, 2022 5,000,000 December 1, 2022 3,000,000 March 1, 2023 6,000,000 5. What is the cost of the building, assuming the building was completed on June 30, 2023? A. 18,000,000 B. 19,884,000 C. 20,868,000 D. 19,377,000
Marie Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan outstanding during 2021 and 2022. The entity began the self-construction of a building on January 1, 2021 and was completed on December 31, 2022. The following expenditures were made during 2021 and 2022: January 1, 2021 4,000,000April 1, 2021 5,000,000December 1, 2021 3,000,000March 1, 2022 6,000,000 1. What is the amount of interest capitalized as ost of the new building? And what is the cost of new building to date dec. 31 2021
Marie Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan outstanding during 2021 and 2022. The entity began the self-construction of a building on January 1, 2021 and was completed on December 31, 2022. The following expenditures were made during 2021 and 2022: January 1, 2021 4,000,000April 1, 2021 5,000,000December 1, 2021 3,000,000March 1, 2022 6,000,000 What amount of interest expense should be reported for 2022?

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