Question

8. Horton Stores exchanged land and cash of $5,000 for similar land. The book value and the fair value of the land were $90,000 and $100,000, respectively. Assuming that the exchange has commercial substance, record the transaction: 9. On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 September 1, 2018 December 31, 2018 March 31, 2019 September 30, 2019 $ 300,000 $ 450,000 $ 450,000 $ 450,000 $ 300,000 Dreamworld had a $5,000,000 construction loan outstanding for the entire construction period. The rate on the construction loan was 12%. Dreamworld's capitalized interest in 2018 was:

Answer 1

Date : I l When enchange the asset should has commercial subetance, be recognised at fair value has be recognise -New Land Alc - Dobit 105,000 Cash Alc - Credit 5.000 old land oc - Credit 90,000 Profit on. Exchange - Credit 10,000 Jan 1, 2018 to sept. 30, 2018 7 21 months 1,950,000 Warehouse cost = (Jom. I, 2018 to Sept 30, dolg) Warehoup (Tan L, 18 to 1200000 cost = Dec 31, 18) Interut on hoan = 5,00, 000 X 12 (Jan. 1,18 to Dec 31,18 E 60,000 Interest on loon - Sodowy 12 X ( Jan 1, 19 to Sept 30, 19) y 2 45,000 105000 Capitalisation of Interest ļ proportionate to cost = of Warehouse 105000 x 1200000 Igsoore af 64,615