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Construction of this equipment started on January 1, 2011 and was completed on January 1, 2012. Old Line borrowed $20.0 million denominated in US dollars on January 1, 2011 to finance construction of this equipment. The interest rate on this loan was 10%. Old Line made payments to the construction company of $10.0 million on January 1, 2011 and $10.0 million on July 1, 2011. Excess funds during this period were invested at a return of 6%. Old Line also incurred a $1.0 million exchange rate loss on other borrowings during 2011.
Required
a. Provide an analysis of the accounting for each fixed asset item using US GAAP and IFRS. Assume the Company uses straight-line depreciation for all its fixed assets and takes a full year of depreciation in the year of the addition. The accounting issues include, but not limit to, capitalization of borrowing costs, impairment and its reversal, component depreciation, and fair value reporting.
b. Based on your analysis, determine how to best maximize the amount of net fixed assets.
Capacity utilization effect on product mix and profitability and describe how capacity utilization affects product mix and profitability.
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Purpose the journal entries that Rod Corporation recorded during 20X4 related to its investment in Stafford Corporation, considering Rod uses the equity method in accounting for its investment.
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Waters, Inc., acquired 10 % of Denton Corporation on 1 st January, 2012, for $297,400 though Denton's book value on that date was $2,380,000.
Budgeting involves computation of cash budget - which is also its minimum required cash balance. There is an outstanding loan of $2,000 on March 1. Prepare a cash budget for March, April, and May.
A company reports pretax accounting income of $11.5 million, but because of a single temporary difference, taxable income is only $8.9 million. Create a appropriate journal entry to record income taxes.
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