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Capitalization of Interest Langer Airline is converting from piston-type planes to jets. Delivery time for the jets is 3 years, during which substantial progress payments must be made. The multimillion-dollar cost of the planes cannot be financed from working capital; Langer must borrow funds for the payments. Because of high interest rates and the large sum to be borrowed, management estimates that interest costs in the second year of the period will be equal to one-third of income before interest and taxes, and one-half of such income in the third year. After conversion, Langer's passenger-carrying capacity will be doubled with no increase in the number of planes, although the investment in planes would be substantially increased. The jet planes have a 7-year service life. Give your recommendation concerning the proper accounting for interest during the conversion period. Support your recommendation with reasons and suggested accounting treatment. (Disregard income tax implications.)
The net income reported on the income statement for thecurrent year was $167,900. Prepare the cash flowsfrom operating activities section of the statement ofcash flows, using the indirect method.
The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):
The cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as:
Which of the following transactions will not result in termination of a partnership for federal tax purposes? a) The partnership is incorporated. b) A 70% interest in partnership capital and profits is sold to a third party purchaser.
A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchaser's books at:
In its Statement of Net Assets, a government reported: Assets of $90 million, including $30 million in capital assets (net) and liabilities of $50 million, including long-term debt of $15 million, all related to capital asset acquisition.
In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This n..
If the unpaid balance on the above sale is $300 at the end of the grace period, the interest charge is:
To determine whether accounts payable are complete, an auditor performs a test to verify that all merchandise received has been recorded. The population for this test consists of all:
Dunn Corporation's taxable income is less than $40,000. The corporation is not eligible for the AMT small corporation exemption. The CPA preparing the return does not calculate the AMT because he knows that taxable income is less than the AMT stat..
You are thinking about buying a savings bond. The bond costs $50 today and will mature in 10 years with a value of $100. What annual interest rate will the bond earn?
franklin craft store completed the following merchandising transactions in the month of october. at the beginning of
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