5,4005/1/15 Special tax assessment

5,400
5/1/15 Special tax assessment for streets 4,500
5/1/15 Partial payment of new building construction 150,000
8/1/15 Final payment on building construction 150,000
8/1/15 General expenses 30,000
12/31/15 Asset write-up 75,000
$624,900
Additional information:
1. To acquire the land and building on 1/31/15, the company paid $100,000 cash and
1,000 ordinary shares of its (par value = $100/share) which is very actively traded and
had a market price per share of $170.
2. When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000, but also
received $1,500 from the sale of salvaged material.
3. Legal fees covered the following:
Cost of organization $2,500
Examination of title covering purchase of land 2,000
Legal work in connection with the building construction 1,500
$6,000
4. The fire insurance premium covered premiums for a three-year term beginning May 1,
2015.
5. General expenses covered the following for the period 1/2/15 to 8/1/15.
President's salary $20,000
Plant superintendent covering supervision of new building 10,000
$30,000
6. Because of the rising land costs, the president was sure that the land was worth at
least $75,000 more than what it cost the company.
Instructions
Determine the proper balances as of 12/31/15 for a separate land account and a separate
building account. Use separate T-accounts (one for land and one for building) labeling all
the relevant amounts and disclosing all computations.
2
Problem 2 During 2015, Barden Building Company constructed various assets at a total
cost of $8,400,000. The weighted average accumulated expenditures on assets
qualifying for capitalization of interest during 2015 were $5,600,000. The company had
the following debt outstanding at December 31, 2015:
1. 10%, 5-year note to finance construction of various assets,
dated January 1, 2015, with interest payable annually on January 1 $3,600,000
2. 12%, ten-year bonds issued at par on December 31, 2009, with interest
payable annually on December 31 4,000,000
3. 9%, 3-year note payable, dated January 1, 2014, with interest payable
annually on January 1 2,000,000
Instructions
Compute the amounts of each of the following (show computations).
1. Avoidable interest.
2. Total interest to be capitalized during 2015.
Problem 3 Discuss the financial reporting model in the IASB Conceptual Framework.