Blake Company incurred the following equipment related costs: Purchase of factor
ID: 2388554 • Letter: B
Question
Blake Company incurred the following equipment related costs:Purchase of factory equipment ($27,000 list price. $2,000 cash discount given)
25,000
Installation charges related to factory equipment
15,000
Repainting executive offices
5,000
Buying land for new office building
100,000
General contractor's fee on new office building
40,000
Cost of regularly scheduled maintenance on new factory equipment
6,000
Cost to put in parking lot for office building
30,000
Cost to wire new building
14,000
Cost of major remodel of factory
150,000
Determining classification of debt as of 12/31/08
Current
Long term
$100,000 note at 7% interest, payment terms are $10,000 (plus interest) per year for the next 10 years. Borrowed 11/1/08. First payment due 10/31/08
$350,000 note at 7% interest, due in equal annual installments of $85,362. Borrowed 7/1/08. First payment due 6/30/09
Explanation / Answer
Purchase of factory equipment ($27,000 list price. $2,000 cash discount given)
Capitalize Acct Equipment
Installation charges related to factory equipment
Capitalize 15,000 Equipment
Repainting executive offices
Expense 5,000 Repairs & maintenance - building
Buying land for new office building
Capitalize 100,000 Land
General contractor's fee on new office building
Capitalize 40,000 Building
Cost of regularly scheduled maintenance on new factory equipment
Expense 6,000 Repairs & maintenance - equipment
Cost to put in parking lot for office building
Capitalize 30,000 Land improvement
Cost to wire new building
Capitalize 14,000 Building
Cost of major remodel of factory
capitalize 150,000 Building improvement
Determining classification of debt as of 12/31/08
1. Current 10,000 LT 90,000
2. (350,000*.07) to get interest amount of 24,500. $85,362 less 24,500 = 60,862 principal.
Current 60,862 LT 289,138
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