not use ai please Comprehensive Interest Capitalization ProblemOn January 1, Mondello Co. contracted with Smithfield Co. to construct a building for$699,000. The cost of the land was $20,000 and was included in the first payment.The following expenditures were incurred for construction during 2009:March 1 $ 75,000May 1July 1180,000100,000April 1June 1$ 74,000270,000The building was completed and occupied on July 31. To help pay for construction,$80,000 was borrowed on March 1 on a 10%, three-year note payable. The only otherdebt outstanding during the year was a $600,000, 15% note issued two years ago and$700,000, 11% bonds issued two years ago.(a)(b)(c)Calculate the weighted-average accumulated expenditures.Calculate the weighted average interest rate.Calculate avoidable interest.Calculate actual interest.What is the capitalized interest?Prepare the necessary journal entries.Illustrate/indicate how the interest expense and capitalized interest would berecorded in the financial statements.

The capitalization of interest expenses associated with building construction is the difficulty. The…

Answered: Comprehensive Interest Capitalization…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 18E

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On January 1, 2018, the Divine Company took out a 12% P10 million loan to finance the construction of a building. The key dates are as follows: January 1 – Loan interest relating to the project starts to be incurredFebruary 1 – Technical site planning commencesMarch 1 – Expenditures on the project start to be incurredApril 1– Construction Work CommencesNovember 1 – Substantially all of the activities necessary to prepare the asset for its intended use are completeDecember 1 – Building brought into use What amount of interest should divine capitalize for the current year?a. 1,000,000b. 900,000c. 800,000d. 700,000 What is the solution for option C?
Interest During Construction Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following expenditures related to this building: April 1 $396,000 July 1 400,000 September 1 510,000 December 1 120,000 The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%. Required: 1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the nearest dollar. 74,750 X 2. Next Level In the current period, the capitalization of interest decreases shareholders' equity decreases depreciation expense ; in future period the effect of capitalized interest is to
E10-18 Calculating Capitalized Interest Kit Company borrows $6 million at 12% on January 1, 2019, specifically for the purpose of financing the construction of a building that is expected to take 18 months to complete. Kit invests the total amount at 11% until it makes payments for the construction project. During the first year of construction, Kit incurs the following expenditures related to this construction project: January 1 $1,000,000 April 1 $1,600,000 October 1 $1,200,000 December 31 $500,000 Required: 1. Compute the amount of interest expense Kit would capitalize related to the construction of the building. 2. Compute the amount of interest revenue Kit would recognize. 3. Assume that Kit uses IFRS. What amount of interest would be capitalized related to the construction of the building?
Interest Dunng Construction Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following expenditures related to this building: April 1 $396,000 July 1 400,000 September 1 510,000 December 1 120,000 The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%. Required: 1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the nearest dollar. 24 134,794 X
Interest During Construction Matrix Inc. borrowed $1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were: January 1 $258,000 (includes cost of purchasing land of $150,000) May 1 320,000 July 1 450,000 October 31 280,000 In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the entire year. Required: 1. Compute the amount of interest capitalized related to the construction of the building. 2. If the expenditures are assumed to have been incurred evenly throughout the year: Compute weighted average accumulated expenditures Compute the amount of interest capitalized on the building
Capitalization of Interest McPherson Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2015. McPherson expected to complete the building by December 31, 2015. McPherson has the following debt obligations outstanding during the construction period.Construction loan—12% interest, payable semiannually, issuedDecember 31, 2015 $2,000,000Short-term loan—10% interest, payable monthly, and principal payableat maturity on May 30, 2016 1,600,000Long-term loan—11% interest, payable on January 1 of eachyear. Principal payable on January 1, 2019 1,000,000(Carry all computations to two decimal places.)(a) Assume that McPherson completed the office and warehouse building on December 31, 2015, as planned at a total cost of $5,200,000, and the weighted average of accumulated expenditures was $3,800,000. Compute the avoidable interest on this project.(b) Compute the depreciation expense for the year…
Capitalization of interest During 2020, Barden Building Company constructed various assets at a total cost of: $14,700,000 The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2020 were: $9,800,000 The company had the following debt outstanding at December 31, 2020: (Hint : specific construction debt) 1. 10%, 5-year note to finance construction of various assets, dated January 1, 2020, with interest payable annually on January 1 $6,300,000 (Hint : other debt) 2. 12%, ten-year bonds issued at par on December 31, 2014, with interest payable annually on December 31 $7,000,000 3. 9%, 3-year note payable, dated January 1, 2019, with interest payable…
nterest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 $ 492,000 May 1 441,000 October 1 648,000 2020: March 1 1,392,000 June 30 708,000 Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $5 million borrowed on July 1, 2018, at 12% $12 million borrowed on January 1, 2017, at 6% Required: Note: Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ fill in the blank 1 Capitalized interest, 2020 $ fill in the blank 2 If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. $ fill in the blank 3 Since…
User In February 2024, Cullumber Corp, began the construction of a 10-storey building. The construction is expected to be completed by January 2025. during 2024, the following payments were made: Apr. 1: 1010000 Jun. 1: 1500000 Aug. 1: 840000 Oct. 1: 890000 No asset specific debt was incurred. During 2024, Cullumber's general debt consisted of the following: $1.8 million, 5%, 2-year note, $1.1 million, 4.5%, 2-year note, $0.50 million, 3%, 5-year note. Calculate the avoidable borrowing costs. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Thornton Industries began construction of a warehouse on July 1, 2024. The project was completed on March 31, 2025. No new loans were required to fund construction. Thornton does have the following two interest - bearing liabilities that were outstanding throughout the construction period:$4,000,000, 9% note$ 6,000,000, 6% bondsConstruction expenditures incurred were as follows:July 1, 2024$ 430, 000September 30, 2024630,000November 30, 2024630,000 January 30, 2025570,000 The companys fiscal year - end is December 31. Required:Calculate the amount of interest capitalized for 2024 and 2025.
(Capitalization of Borrowing Costs) In early February 2023, Huey Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2023 expenditures relate to the addition: Feb. 1 120,000 Mar. 1 Payment to architect 24,000 July 1 Payment #1 to contractor $ Payment #2 to contractor 60,000 Dec. 1 Payment #3 to contractor 180, 000 Dec. 31 Asset carrying amount $384,000 On February 1, Huey issued a $100,000, three-year note payable at a rate of 12% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2023 bonds, issued May 1, 2008, matured May 1, 2023 Principal Amount 9%, 15-year $300,000 7%, 10-year bonds, issued June 15, 2017 $500,000 6%, 12-year bonds, issued May 1, 2023 $300,000 Instructions What amount of interest should be capitalized for the…
Capital versus Revenue Expenditures On January 1, 2014, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2016: â€¢ The building was painted at a cost of $5,000. â€¢ To prevent leaking, new windows were installed in the building at a cost of $10,000. â€¢ To improve production, a new conveyor system was installed at a cost of $40,000. â€¢ The delivery truck was repainted with a new company logo at a cost of $1,000. â€¢ To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000. â€¢ The trucks engine was overhauled at a cost of $4,000. Required Determine which of those costs should be capitalized. Also record the journal entry for the capitalized costs. Assume that all costs were incurred on January 1, 2016. Determine the amount of depreciation for the year 2016. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets. How would the assets appear on the balance sheet of December 31, 2016?

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