chapter 10-1. chapter 10-2 chapter 10 accounting for property, plant, and equipment intermediate...

Chapter 10-1

Chapter 10-2

CHAPTER 10

ACCOUNTING FOR PROPERTY, PLANT, AND EQUIPMENT

INTERMEDIATE ACCOUNTING

Principles and Analysis

2nd Edition

Warfield Weygandt

Kieso

Chapter 10-3

1.1. Describe property, plant, and equipment and costs to include in its Describe property, plant, and equipment and costs to include in its initial valuation.initial valuation.

2.2. Describe the accounting problems associated with interest Describe the accounting problems associated with interest capitalization.capitalization.

3.3. Understand accounting issues related to acquiring and valuing plant Understand accounting issues related to acquiring and valuing plant assets. assets.

4.4. Describe the accounting treatment for costs subsequent to acquisition.Describe the accounting treatment for costs subsequent to acquisition.

5.5. Explain the concept of depreciation. Explain the concept of depreciation.

6.6. Identify the factors involved in the depreciation process.Identify the factors involved in the depreciation process.

7.7. Compare activity, straight-line, and decreasing-charge methods of Compare activity, straight-line, and decreasing-charge methods of depreciation.depreciation.

8.8. Describe the accounting treatment for the disposal of property, plant, Describe the accounting treatment for the disposal of property, plant, and equipment.and equipment.

9.9. Explain how to report and analyze property, plant, and equipment.Explain how to report and analyze property, plant, and equipment.

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

Chapter 10-4

Additions Additions Improvements Improvements and and replacementsreplacements

Rearrangement Rearrangement and and reinstallation reinstallation

RepairsRepairs

Acquisition Acquisition and Valuationand Valuation

Costs Costs Subsequent Subsequent

to to AcquisitionAcquisition

Use of PP&E: Use of PP&E:

DepreciationDepreciationDispositionsDispositions

Presentation Presentation

and Analysisand Analysis

Acquisition Acquisition costs: Land, costs: Land, buildings, buildings, equipment equipment

Self-Self-constructed constructed assetsassets

Interest costsInterest costs

Other Other valuation valuation issuesissues

Factors Factors involvedinvolved

Methods of Methods of depreciationdepreciation

Special Special issuesissues

Sale Sale

Involuntary Involuntary conversionconversion

ExchangesExchanges

PresentationPresentation

AnalysisAnalysis

Property, Plant, and EquipmentProperty, Plant, and EquipmentProperty, Plant, and EquipmentProperty, Plant, and Equipment

Chapter 10-5

“Used in operations” and not for resale.

Long-term in nature and usually depreciated.

Possess physical substance.

Property, plant, and equipment includes land, buildings, and equipment (machinery, furniture, tools).

Major characteristics include:

Property, Plant, and EquipmentProperty, Plant, and EquipmentProperty, Plant, and EquipmentProperty, Plant, and Equipment

LO 1 Describe property, plant, and LO 1 Describe property, plant, and equipmentequipment and costs to include in and costs to include in its initial valuation.its initial valuation.

Chapter 10-6

At acquisition, cost reflects fair value.

Historical cost is reliable.

Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold.

Valued at Historical Cost, reasons include:

Acquisition and Valuation of PP&EAcquisition and Valuation of PP&EAcquisition and Valuation of PP&EAcquisition and Valuation of PP&E

APB Opinion No. 6 states, “property, plant, and

equipment should not be written up to reflect appraisal, market, or

current values which are above cost.”

APB Opinion No. 6 states, “property, plant, and

equipment should not be written up to reflect appraisal, market, or

current values which are above cost.”


Chapter 10-7

Includes all costs to acquire land and ready it for use. Costs typically include:

Cost of Land


(1) the purchase price;

(2) closing costs, such as title to the land, attorney’s fees, and recording fees;

(3) costs of grading, filling, draining, and clearing;

(4) assumption of any liens, mortgages, or encumbrances on the property; and

(5) Additional land improvements that have an indefinite life.


Chapter 10-8

Includes all costs related directly to acquisition or construction.

Costs typically include:

Cost of Buildings


(1) materials, labor, and overhead costs incurred during construction and

(2) professional fees and building permits.


Chapter 10-9

Include all costs incurred in acquiring the equipment and preparing it for use.


Cost of Equipment


(1) purchase price,

(2) freight and handling charges

(3) insurance on the equipment while in transit,

(4) cost of special foundations if required,

(5) assembling and installation costs, and

(6) costs of conducting trial runs.LO 1 Describe property, plant, and LO 1 Describe property, plant, and

equipmentequipment and costs to include in and costs to include in its initial valuation.its initial valuation.

Chapter 10-10

Exercise: (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how the following should be classified:


(a) Money borrowed to pay building contractor

(b) Payment for construction from note proceeds

(c) Cost of land fill and clearing

(d) Delinquent real estate taxes on property assumed

(e) Premium on insurance policy during construction

(f) Refund of 1-month insurance premium because construction completed early

ClassificationClassification

Notes Notes PayablePayableBuildingBuilding

LandLand

LandLand

BuildingBuilding

(Building)(Building)


Chapter 10-11


(g) Architect’s fee on building

(h) Cost of real estate purchased as a plant site (land $200,000 and building $50,000)

(i) Commission fee paid to real estate agency

(j) Installation of fences around property

(k) Cost of razing and removing building

(l) Proceeds from salvage of demolished building

(m) Cost of parking lots and driveways

(n) Cost of trees and shrubbery (permanent)

Costs of:Costs of:

BuildingBuilding

LandLand

LandLand

Land Land ImprovementsImprovements

LandLand

(Land)(Land)

Land Land ImprovementsImprovementsLandLand


Exercise: (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how the following should be classified:

Chapter 10-12

Self-Constructed Assets



(1) Materials and direct labor

(2) Overhead can be handled in two ways:

1. Assign no fixed overhead

2. Assign a portion of all overhead to the construction process.

Companies use the second method extensively.


Chapter 10-13

Three approaches have been suggested to account for the interest incurred in financing the construction.

Interest Costs During Construction


LO 2 Describe the accounting problems associated with interest LO 2 Describe the accounting problems associated with interest capitalization.capitalization.

Capitalize no Capitalize no interest interest during during

constructionconstruction

Capitalize Capitalize actualactual costscosts incurred incurred

duringduring construction construction (with modification)(with modification)

Capitalize Capitalize all costs all costs of fundsof funds

GAAPGAAP

$ 0$ 0 $ ?$ ?Increase to Cost of AssetIncrease to Cost of Asset

Illustration 10-1

Chapter 10-14

GAAP requires — capitalizing actual interest (with modification).

Consistent with historical cost — all costs incurred to bring the asset to the condition for its intended use.




Chapter 10-15

Interest Capitalization Illustration: Richard Company begins construction on a building early in 2008 and completes construction by the end of the year. Richard incurred total interest costs on borrowing during 2008 in the amount of $325,000. It determines that $165,000 of these interest costs is attributable to expenditures on the new building. Prepare a summary journal entry to show how Richards would record capitalized interest and interest expense in 2008.


Building 165,000

Interest Expense 160,000

Cash325,000(See slides at Appendix 10A for a comprehensive illustration of capitalized interest.)


Chapter 10-16

Special Issues Related to Interest Capitalization

Two issues:

1. Expenditures for land.

2. Interest revenue.



Chapter 10-17

Companies should record property, plant, and equipment:

at the fair value of what they give up or

at the fair value of the asset received,

whichever is more clearly evident.

Other Valuation Issues

LO 3 Understand accounting issues related to acquiring and valuing LO 3 Understand accounting issues related to acquiring and valuing plant assets.plant assets.


Cash Discounts — whether taken or not — generally considered a reduction in the cost of the asset.

Chapter 10-18

Lump-Sum Purchases

Allocate the total cost among the various assets on the basis of their fair market values.

Issuance of Stock

The market value of the stock issued is a fair indication of the cost of the property acquired.


LO 3 Understand accounting issues related to acquiring and valuing LO 3 Understand accounting issues related to acquiring and valuing plant assets.plant assets.

Chapter 10-19 LO 3 Understand accounting issues related to acquiring and valuing LO 3 Understand accounting issues related to acquiring and valuing

plant assets.plant assets.

Companies should use:

the fair value of the asset to establish its value on the books and

should recognize contributions received as revenues in the period received.

Accounting for Contributions


Chapter 10-20

Costs Subsequent to AcquisitionCosts Subsequent to AcquisitionCosts Subsequent to AcquisitionCosts Subsequent to Acquisition

LO 4 Describe the accounting treatment for costs subsequent to LO 4 Describe the accounting treatment for costs subsequent to acquisition.acquisition.

In general, costs incurred to achieve greater future benefits should be capitalized, whereas expenditures that simply maintain a given level of services should be expensed.

To capitalize costs, one of three conditions must be present:

Useful life of the asset must be increased.

Quantity of units produced from asset must be increased.

Quality of units produced must be enhanced.

Chapter 10-21

Costs Subsequent to AcquisitionCosts Subsequent to AcquisitionCosts Subsequent to AcquisitionCosts Subsequent to Acquisition

LO 4 Describe the accounting treatment for costs subsequent to LO 4 Describe the accounting treatment for costs subsequent to acquisition.acquisition.

Additions

Improvements and replacements

Rearrangement and reinstallation

Repairs

Major Types of Expenditures

See Illustration 10-6, in the text, for summary of normal accounting treatment for these expenditures.

Chapter 10-22

Allocating costs of long-term assets:

Fixed assets = Depreciation expense

Intangibles = Amortization expense

Natural resources = Depletion expense

Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.

Use of PP&E: DepreciationUse of PP&E: DepreciationUse of PP&E: DepreciationUse of PP&E: Depreciation

LO 5 Explain the concept of depreciation.LO 5 Explain the concept of depreciation.

Chapter 10-23 LO 6 Identify the factors involved in the depreciation process.LO 6 Identify the factors involved in the depreciation process.

Three basic questions:

Factors Involved in the Depreciation Process

(1) What depreciable base is to be used?

(2) What is the asset’s useful life?

(3) What method of cost allocation is best?


Chapter 10-24

LO 7 Compare activity, straight-line, and LO 7 Compare activity, straight-line, and decreasing-charge methods of decreasing-charge methods of depreciation.depreciation.

The profession requires the method employed be “systematic and rational.” Examples include:

Methods of Depreciation

(1) Activity method (units of use or production).

(2) Straight-line method.

(3) Sum-of-the-years’-digits.

(4) Declining-balance method.Decreasing charge Decreasing charge methodsmethods


Chapter 10-25


Exercise (Depreciation Computations—Four Methods): Robert Parish Corporation purchased a new machine for its assembly process on September 30, 2007. The cost of this machine was $117,900. The company estimated that the machine would have a salvage value of $12,900 at the end of its service life. Its life is estimated at 5 years and its working hours are estimated at 1,000 hours. Year-end is December 31.Instructions: Compute the depreciation expense under the following methods.

(a) Straight-line depreciation.

(b) Activity method.

(c) Sum-of-the-years’-digits.

(d) Double-declining balance.


Chapter 10-26


Exercise (Straight-line Method)Current

Depreciable Annual Partial Year Accum.Year Base Years Expense Year Expense Deprec.

2007 105,000$ / 5 = 21,000$ x 3/12 = 5,250$ 5,250$

2008 105,000 / 5 = 21,000 21,000 26,250

2009 105,000 / 5 = 21,000 21,000 47,250

2010 105,000 / 5 = 21,000 21,000 68,250

2011 105,000 / 5 = 21,000 21,000 89,250

2012 105,000 / 5 = 21,000 x 9/12 = 15,750 105,000

105,000$

J ournal entry:

2007 Depreciation expense 5,250

Accumultated depreciation 5,250


Chapter 10-27


Exercise (Activity Method)

($105,000 / 1,000 hours = $105 per hour)

(Given) CurrentHours Rate per Annual Partial Year Accum.

Year Used Hours Expense Year Expense Deprec.

2007 200 x $105 = 21,000$ 21,000$ 21,000$

2008 150 x 105 = 15,750 15,750 36,750

2009 250 x 105 = 26,250 26,250 63,000

2010 300 x 105 = 31,500 31,500 94,500

2011 100 x 105 = 10,500 10,500 105,000

1,000 105,000$

J ournal entry:




Chapter 10-28


Exercise (Sum-of-the-years’-digits Method)Current

Depreciable Annual Partial Year Accum.Year Base Years Expense Year Expense Deprec.

2007 105,000$ x 5/15 = 35,000$ x 3/12 8,750$ 8,750$

2008 105,000 x 4.75/15 = 33,250 33,250 42,000

2009 105,000 x 3.75/15 = 26,250 26,250 68,250

2010 105,000 x 2.75/15 = 19,250 19,250 87,500

2011 105,000 x 1.75/15 = 12,250 12,250 99,750

2012 105,000 x .75/15 = 5,250 5,250 105,000

105,000$

J ournal entry:




Chapter 10-29


Exercise (Double-Declining Balance Method)Current

Depreciable Rate Annual Partial Year Accum.Year Base per Year Expense Year Expense Deprec.

2007 117,900$ x 40% = 47,160$ x 3/12 = 11,790$ 11,790$

2008 106,110 x 40% = 42,444 42,444 54,234

2009 63,666 x 40% = 25,466 25,466 79,700

2010 38,200 x 40% = 15,280 15,280 94,980

2011 22,920 x 40% = 9,168 9,168 104,148

2012 13,752 x 40% = 5,501 Plug 852 105,000

105,000$

J ournal entry:




Chapter 10-30

Special Depreciation Issues

(1) How should depreciation be computed for partial periods?

Companies normally compute depreciation on the basis of the nearest full month.

(2) How are revisions in depreciation rates handled?



Chapter 10-31

Changes in Depreciation Rate

Accounted for in the period of change and future periods (Change in Estimate)

Not handled retrospectively

Not considered errors or extraordinary items



Chapter 10-32

Disposition of Plant AssetsDisposition of Plant AssetsDisposition of Plant AssetsDisposition of Plant Assets

LO 8 Describe the accounting treatment for the LO 8 Describe the accounting treatment for the disposal of property, plant, and equipment.disposal of property, plant, and equipment.

Sale of Plant Assets

Exercise: Sim City Corporation owns machinery that cost $20,000 when purchased on January 1, 2005. Depreciation has been recorded at a rate of $3,000 per year, resulting in a balance in accumulated depreciation of $9,000 at December 31, 2007. The machinery is sold on September 1, 2008, for $10,500. Prepare journal entries to (a) update depreciation for 2008 and (b) record the sale.

Chapter 10-33

(a) Update depreciation for 2008

Depreciation Expense ($3,000 x 8/12) 2,000

Accumulated Depreciation2,000


(b) Record the sale

Cash 10,500

Accumulated Depreciation 11,000

Machinery20,000

Gain on Sale1,500


Chapter 10-34

Sometimes an asset’s service is terminated through some type of involuntary conversion such as fire, flood, theft, or condemnation.

Companies report the difference between the amount recovered (e.g., from a condemnation award or insurance recovery), if any, and the asset’s book value as a gain or loss.

They treat these gains or losses like any other type of disposition.

Involuntary Conversion



Chapter 10-35

Ordinarily accounted for on the basis of:

the fair value of the asset given up or

the fair value of the asset received,

whichever is clearly more evident.

Exchanges

Companies should recognize immediately any gains or losses on the exchange when the transaction has commercial substance (future cash flows change as a result of the transaction).



Chapter 10-36

Accounting for Exchanges

* If cash is 25% or more of the fair value of the exchange, recognize entire gain because earnings process is complete.

Illustration 10-17



Chapter 10-37

Companies recognize a loss immediately whether the exchange has commercial substance or not.

Rationale: Companies should not value assets at more than their cash equivalent price; if the loss were deferred, assets would be overstated.

Exchanges - Loss Situation



Chapter 10-38

Exchange – Gain Situation Illustration: Carlos Arruza Company exchanged equipment used in its manufacturing operations plus $3,000 in cash for similar equipment used in the operations of Tony LoBianco Company. The following information pertains to the exchange.

Arruza LoBiancoEquipment (cost) $28,000 $28,000 Accumulated Depreciation 19,000 10,000Fair value of equipment 15,500 12,500Cash given up 3,000

Instructions: Prepare the journal entries to record the exchange on the books of both companies.



Chapter 10-39

Calculation of Gain or Loss

Arruza LoBiancoFair value of equipment received $12,500 $15,500 Cash received / paid 3,000 (3,000)Less: Bookvalue of equipment

($28,000-19,000) (9,000)($28,000-10,000) (18,000)

Gain or (Loss) on Exchange $6,500 ($5,500)

When a company receives cash (sometimes referred to as “boot”) in an exchange that lacks commercial substance, it may immediately recognize a portion of the gain.



Chapter 10-40


Has Commercial Substance

Arruza:Equipment 12,500Cash

3,000Accumulated Depreciation 19,000

Equipment28,000

Gain on Exchange6,500

LoBianco:


Equipment 15,500Accumulated Depreciation 10,000

Equipment28,000

Cash3,000

Loss on Exchange 5,500

Chapter 10-41

Lacks Commercial Substance

Arruza:Equipment (12,500 – 5,242) 7,258Cash

3,000Accumulated Depreciation 19,000

Equipment28,000

Gain on Exchange1,258

Cash ReceivedCash Received

Cash Received + FMV of Assets Cash Received + FMV of Assets ReceivedReceived

xx Total Total GainGain

== Recognized Recognized GainGain

$3,000$3,000

$3,000 + $12,500$3,000 + $12,500xx $6,500$6,500 == $1,258$1,258


LO 8 LO 8 Describe the accounting Describe the accounting treatment for the disposal of property, plant, and treatment for the disposal of property, plant, and equipment.equipment.

Deferred gain = $6,500 – 1,258 = Deferred gain = $6,500 – 1,258 = $5,242$5,242

Chapter 10-42

Lacks Commercial Substance

LoBianco (no change):Equipment 15,500Accumulated Depreciation 10,000

Equipment28,000

Cash3,000

Loss on Exchange 5,500Companies recognize a loss immediately whether the exchange has commercial substance or not.



Chapter 10-43

Summary of Gain and Loss Recognition on Exchanges of Nonmonetary Assets Lacks Commercial Substance

Illustration 10-27



Chapter 10-44

Presentation of Property, Plant, Equipment

Presentation and AnalysisPresentation and AnalysisPresentation and AnalysisPresentation and Analysis

Basis of valuation (cost)

Pledges, liens, and other commitments

Depreciation expense for the period.

Balances of major classes of depreciable assets.

Accumulated depreciation.

A description of the depreciation methods used.

Depreciating assets, use Accumulated Depreciation.

Depleting assets may include use of Accumulated Depletion account, or the direct reduction of asset.

DisclosuresDisclosures

LO 9 Explain how to report and analyze property, plant, LO 9 Explain how to report and analyze property, plant, equipment.equipment.

Chapter 10-45

Rate of Return on Assets measures a firm’s success in using assets to generate earnings.

Net Income

Average Total Assets ROA =

$56,200

($1,030,400 + 682,400) / 2 6.56% =



Chapter 10-46

The analyst obtains further insight into the behavior of ROA by disaggregating it into components of profit margin on sales and asset turnover as follows:

Net Income

Average Total Assets

Rate of Return on Assets

=

Net Income

Sales

Profit Margin on Sales

=

Sales

Asset Turnover

x

x Average Total Assets



Chapter 10-47

The analyst obtains further insight into the behavior of ROA by disaggregating it into components of profit margin on sales and asset turnover as follows:

$56,200

($1,030,400 + 682,400) / 2


=

$56,200

$300,000


=

$300,000

Asset Turnover

x

x


6.56% 18.73% =

x

.3503

($1,030,400 + 682,400) / 2


Chapter 10-48

The The profit margin on sales is a measure of the is a measure of the ability of a firm to generate operating income from ability of a firm to generate operating income from a particular level of sales.a particular level of sales.


=


Asset Turnover

x


=

x

.3503

Net Income


Net Income

Sales =

Salesx Average Total Assets

6.56% 18.73%


Chapter 10-49

The The profit margin on sales is a measure of the is a measure of the ability of a firm to generate operating income from ability of a firm to generate operating income from a particular level of sales.a particular level of sales.


=


Asset Turnover

x


Net Income


Net Income

Sales =


Differences in the profit margin on sales (from year to year) can be studied by analyzing individual revenues and expenses.


Chapter 10-50

The The assets turnover is a measure of a firm’s ability to is a measure of a firm’s ability to generate sales from a particular investment in assets. generate sales from a particular investment in assets.


=


Asset Turnover

x


=

x

.3503

Net Income


Net Income

Sales =


6.56% 18.73%


Chapter 10-51

APPENDIX 10A

Interest Capitalization IllustrationInterest Capitalization IllustrationInterest Capitalization IllustrationInterest Capitalization Illustration

Chapter 10-52

GAAP requires — capitalizing actual interest (with modification).

Consistent with historical cost — all costs incurred to bring the asset to the condition for its intended use.

Capitalization considers three items:

1. Qualifying assets.

2. Capitalization period.

3. Amount to capitalize.



Chapter 10-53

Require a period of time to get them ready for their intended use.

Two types of assets:

Assets under construction for a company’s own use.

Assets intended for sale or lease that are constructed or produced as discrete projects.

Qualifying Assets


Chapter 10-54

Capitalization Period

Begins when:

1. Expenditures for the asset have been made.

2. Activities for readying the asset are in progress .

3. Interest costs are being incurred.

Ends when:

The asset is substantially complete and ready for use.


Chapter 10-55

Amount to Capitalize

Capitalize the lesser of:

1. Actual interest costs

2. Avoidable interest - the amount of interest that could have been avoided if expenditures for the asset had not been made.


Chapter 10-56

Interest Capitalization Illustration: Delmar Corporation borrowed $200,000 at 12% interest from State Bank on Jan. 1, 2005, for specific purposes of constructing special-purpose equipment to be used in its operations. Construction on the equipment began on Jan. 1, 2005, and the following expenditures were made prior to the project’s completion on Dec. 31, 2005:Actual Expenditures:

J anuary 1, 2005 $100,000

April 30, 2005 150,000

November 1, 2005 300,000

December 31, 2005 100,000

Total expenditures $650,000

Other general debt existing on Jan. 1, 2005:

$500,000, 14%, 10-year bonds payable

$300,000, 10%, 5-year note payable


Chapter 10-57

Step 1 - Determine which assets qualify for capitalization of interest.

Special purpose equipment qualifies because it requires a period of time to get ready and it will be used in the company’s operations.

Step 2 - Determine the capitalization period.

The capitalization period is from Jan. 1, 2005 through Dec. 31, 2005, because expenditures are being made and interest costs are being incurred during this period while construction is taking place.


Chapter 10-58

WeightedAverage

Actual Capitalization Accumulated Date Expenditures Period Expenditures

J an. 1 100,000$ 12/ 12 100,000$ Apr. 30 150,000 8/ 12 100,000 Nov. 1 300,000 2/ 12 50,000 Dec. 31 100,000 0/ 12 -

650,000$ 250,000$

Step 3 - Compute weighted-average accumulated expenditures.

A company weights the construction expenditures by the amount of time (fraction of a year or accounting period) that it can incur interest cost on the expenditure.


Chapter 10-59

Step 4 - Compute the Actual and Avoidable Interest. Selecting Appropriate Interest Rate:

1. For the portion of weighted-average accumulated expenditures that is less than or equal to any amounts borrowed specifically to finance construction of the assets, use the interest rate incurred on the specific borrowings.

2. For the portion of weighted-average accumulated expenditures that is greater than any debt incurred specifically to finance construction of the assets, use a weighted average of interest rates incurred on all other outstanding debt during the period.


Chapter 10-60

Accumulated I nterest Avoidable

Expenditures Rate I nterest

200,000$ 12% 24,000$

50,000 12.5% 6,250

250,000$ 30,250$

Step 4 - Compute the Actual and Avoidable Interest.

Avoidable Avoidable InterestInterest

I nterest Actual

Debt Rate I nterest

Specific Debt 200,000$ 12% 24,000$

General Debt 500,000 14% 70,000

300,000 10% 30,000

1,000,000$ 124,000$

Weighted-average interest rate on general

debt

Actual InterestActual Interest

$100,000 $800,000

= 12.5%


Chapter 10-61

Step 5 – Capitalize the lesser of Avoidable interest or Actual interest.

Avoidable interest 30,250$

Actual interest 124,000

Journal entry to Capitalize Interest:

Equipment 30,250

Interest Expense30,250


Chapter 10-62

Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

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