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2. Early in 2022, Erin Corporation engaged Mikell, Inc. to design and construct a complete modernization of Erin's manufacturing facility. Construction was begun on May 1, 2022 and was completed on December 31, 2022. Erin made the following payments to Mikell, Inc. during 2022: May 1 $3,000,000 September 1 4,400,000 December 1 2,200,000 In order to help finance the construction, Erin issued $1,500,000 of 10-year, 5% bonds payable, issued at par on April 30, 2022, with interest payable annually on April 30. In addition, Erin had a $3,500,000, 6% note payable dated January 1, 2005 and due January 1, 2024, with interest payable annually on January 1 and a $1,000,000, 4% note payable dated July 1, 2009 and due June 30, 2023, with interest payable annually on June 30. Required: a. Calculate the weighted-average accumulated expenditures. b. Calculate avoidable interest. c. Calculate total amount of interest to be capitalized during 2022.

2. Early in 2022, Erin Corporation engaged Mikell, Inc. to design and construct a complete modernization of Erin's manufacturing facility. Construction was begun on May 1, 2022 and was completed on December 31, 2022. Erin made the following payments to Mikell, Inc. during 2022: May 1 $3,000,000 September 1 4,400,000 December 1 2,200,000 In order to help finance the construction, Erin issued $1,500,000 of 10-year, 5% bonds payable, issued at par on April 30, 2022, with interest payable annually on April 30. In addition, Erin had a $3,500,000, 6% note payable dated January 1, 2005 and due January 1, 2024, with interest payable annually on January 1 and a $1,000,000, 4% note payable dated July 1, 2009 and due June 30, 2023, with interest payable annually on June 30. Required: a. Calculate the weighted-average accumulated expenditures. b. Calculate avoidable interest. c. Calculate total amount of interest to be capitalized during 2022.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. Early in 2022, Erin Corporation engaged Mikell, Inc. to design and construct a complete modernization of Erin's manufacturing facility. Construction was begun on May 1, 2022 and was completed on December 31, 2022. Erin made the following payments to Mikell, Inc. during 2022: May 1 $3,000,000 September 1 4,400,000 December 1 2,200,000 In order to help finance the construction, Erin issued $1,500,000 of 10-year, 5% bonds payable, issued at par on April 30, 2022, with interest payable annually on April 30. In addition, Erin had a $3,500,000, 6% note payable dated January 1, 2005 and due January 1, 2024, with interest payable annually on January 1 and a $1,000,000, 4% note payable dated July 1, 2009 and due June 30, 2023, with interest payable annually on June 30. Required: a. Calculate the weighted-average accumulated expenditures. b. Calculate avoidable interest. c. Calculate total amount of interest to be capitalized during 2022.
Transcribed Image Text:2. Early in 2022, Erin Corporation engaged Mikell, Inc. to design and construct a complete modernization of Erin's manufacturing facility. Construction was begun on May 1, 2022 and was completed on December 31, 2022. Erin made the following payments to Mikell, Inc. during 2022: May 1 $3,000,000 September 1 4,400,000 December 1 2,200,000 In order to help finance the construction, Erin issued $1,500,000 of 10-year, 5% bonds payable, issued at par on April 30, 2022, with interest payable annually on April 30. In addition, Erin had a $3,500,000, 6% note payable dated January 1, 2005 and due January 1, 2024, with interest payable annually on January 1 and a $1,000,000, 4% note payable dated July 1, 2009 and due June 30, 2023, with interest payable annually on June 30. Required: a. Calculate the weighted-average accumulated expenditures. b. Calculate avoidable interest. c. Calculate total amount of interest to be capitalized during 2022.
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