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ID: 2450601 • Letter: W
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Date
Account Titles and Explanation
Debit
Credit
7/31
(To record the note.)
(To record the payment to Minsk.)
11/1
(To record the proceeds from the investment.)
(To record the payment to Minsk.)
12/31
On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2014. To help finance construction, on July 31 Amsterdam issued a $452,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $341,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $111,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2014, is a $37,100, 8%, 6-year note payable, dated January 1, 2011, on which interest is payable each December 31.Warning
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Explanation / Answer
Date Expenditure Capital period = WAAE
7/31 $341,400 3/12 = 85,350
11/1 $111,000 0 = 0____
$85,350
Avoidable Interest @ X 12% $10,242
Actual Interest
Const. $$452,400 x 12% x 5/12 22,620
Other $37,100 x 8% x 1 2,968
25,588
======
Date
Account Titles and Explanation
Debit
Credit
7/31
Cash
452,400
Note Payable
452,400
(To record the note.)
Machinery
341,400
Trading Securities
111,000
Cash
452,400
(To record the payment to Minsk.)
11/1
Cash
113,775
Trading Securities
111,000
Interest revenue ($111,000 x 10% x 3/12)
2,775
(To record the proceeds from the investment.)
Machine
111,000
Cash
111,000
(To record the payment to Minsk.)
12/31
Interest Expense ($37,100 x 8%)
2,968
Cash
2,968
(To record interest payment on note payable of $37,100)
Date
Account Titles and Explanation
Debit
Credit
7/31
Cash
452,400
Note Payable
452,400
(To record the note.)
Machinery
341,400
Trading Securities
111,000
Cash
452,400
(To record the payment to Minsk.)
11/1
Cash
113,775
Trading Securities
111,000
Interest revenue ($111,000 x 10% x 3/12)
2,775
(To record the proceeds from the investment.)
Machine
111,000
Cash
111,000
(To record the payment to Minsk.)
12/31
Interest Expense ($37,100 x 8%)
2,968
Cash
2,968
(To record interest payment on note payable of $37,100)
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