Determine the total cost to be allocated to the land. Determine the interest exp

Question

Determine the total cost to be allocated to the land.

Determine the interest expense for 2018 and the carrying value of the note on Dec. 31, 2018, after                the

              adjusting entry for interest expense has been made. (Round to the nearest dollar.)

On January 1, 2017, a company purchased land for a future warehouse site. A $50,000 down payment is made on that date. Annual payments of $70,000 for the 790, 10-year loan are to start on Dec. 31, 2017. 3. Determine the total cost to be allocated to the land $517,080 $491,680 $541,680 $750,000 S405,600 Determine the interest expense for 2018 and the carrying value of the note on Dec. 31, 2018, after the adjusting entry for interest expense has been made. (Round to the nearest dollar.) 4. 2018 Interest Expense 12/31/18 Carrying_Value $31,927 $35,672 $25,479 S33,829 $47,530 $418,025 $475,270 $319,471 S447,105 $656,530

Explanation / Answer

3) Calculate total amount allocated to land:

Amount allocated to land = (70000*7.024+50000) = 541680

So answer is c) $541680

4) Notes payable = 70000*7.024 = 491680

2017 Interest expense = 491680*7% = 34418

2017 Carrying value = 491680-(70000-34418) = 456098

2018 Interest expense = 456098*7% = 31927

2018 Carrying value = 456098-(70000-31927) = 418025

So answer is a) 2018 interest expense $31927 ; 2018 Carrying value = $418025

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