College of Administration and Finance Sciences Assignment (3) Deadline: Saturday 27/11/2021 @ 23:59 Course Name: Financial Accounting Student’s Name: Course Code: ACCT 201 Student’s ID Number: Semester: 1st CRN: Academic Year: 1443 H For Instructor’s Use only Instructor’s Name: Students’ Grade: /5 Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Late submission will NOT be accepted. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism. • Submissions without this cover page will NOT be accepted. 1 College of Administration and Finance Sciences Assignment Question(s): (Marks 5) Q1. What are the items considered in Capitalization of interests? Describe each item [1 marks] Q2. Intangible assets have three main characteristics: (1) they are identifiable, (2) they lack physical existence, and (3) they are not monetary assets. Instructions (a) Explain why intangibles are classified as assets if they have no physical existence. [0.5 mark] (b) Explain why intangibles are not considered monetary assets. [0.25 mark] (c) And, why does the accounting profession make a distinction between internally created intangible assets and purchased intangible assets? [0.25 mark] Q3. On April 1, Paine Co. began construction of a small building. Payments of SAR 120,000 were made monthly for four months beginning on April 1. The building was completed and ready for occupancy on August 1. For the purpose of determining the amount of interest cost to be capitalized, calculate the weighted-average accumulated expenditures on the building by completing the schedule below: [1 mark] Answer: Date Expenditures Capitalization Period Weighted-Average Expenditures Q4. Equipment that cost SAR80,000 and has accumulated depreciation of SAR43,000 is exchanged for equipment with a fair value of SAR32,000 and SAR8,000 cash is received. The exchange has commercial substance. Instructions (a) Show the calculation of the gain to be recognized from the exchange. [0.5 mark] (b) Prepare the entry for the exchange. [0.5 mark] 2 College of Administration and Finance Sciences Q5. Presented below are the components related to an office building that Lockard Company is considering purchasing for SAR10,000,000. Component Useful Life Value Building structure 60-year life 5,400,000 Building engineering 30-year life 2,400,000 Building external works 30-year life 900,000 Instructions (a) Compute depreciation expense for 2010, assuming that Lockard uses component depreciation. [0.5 mark] (b) Assume that the building engineering was replaced in 20 years at a cost of SAR 2,600,000. Prepare the entry to record the replacement of the old component with the new component. [0.5 mark] 3
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