Assignment - Complete both problems. Show all calculations.
Problem 1 - XYZ's beginning balance of Assets under Construction was $5 million on January 1, 2011. On July 1, 2011 XYZ paid $2 million more to its contractors and on October 1, they paid an additional $8 million. XYZ has no specific borrowings related to the construction, but has the following loans outstanding unrelated to the construction project:
9% loan from KLM bank borrowed on April 1, 2010 $5 million
15% loan from FGD bank borrowed on Jan 1, 2009 $10 million
Required: Show XYZ's capitalized interest disclosure in the footnotes for the year ended December 31, 2011. Be sure to clearly mention the amount capitalized. Show all calculations.
Problem 2 - Picard Enterprises purchased a spaceship on November 1, 2014 for $260 million. Test runs and weapon system checks costing $60 million were performed to prepare the spaceship for duty. Picard estimates that the ship will last 4 years and can be sold at a salvage value of $80 million. Picard uses the double declining balance method of depreciation for financial reporting and applies the half-year convention to assets placed in service in the middle of a fiscal year.
Required:
1. Give Picard's adjusting journal entry to record depreciation expense for the year ended December 31, 2017.
2. What is the net book value of the spaceship on December 31, 2017?