Exercise 10-24 (Algo) Interest capitalization [LO10-7] On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $1,550,000 at 7% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021: $9,000,000, 11% bonds $3,000,000, 7% long-term note Construction expenditures incurred during 2021 were as follows: January 1 March 31 June 30 September 30 December 31 Required: Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).) Date $ 680,000 1,280,000 896,000 680,000 480,000 January 1 March 31 June 30 September 30 December 31 Accumulated expenditure Average accumulated X Answer is complete but not entirely correct. Expenditure Weight 680,000 x 1,280,000x 896,000 x 680,000 x 480,000 x $ 4,016,000 Amount is 2258 000 12/12 = 9/12 = 6/12 = 3/12 = 0/12 = Interest Rate $ Average 680,000✔ 960,000 448,000 170,000 0 $ 2,258,000 Capitalized Interest < Prev 8 of Ō # Next >

Exercise 10-24 (Algo) Interest capitalization [LO10-7] On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $1,550,000 at 7% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021: $9,000,000, 11% bonds $3,000,000, 7% long-term note Construction expenditures incurred during 2021 were as follows: January 1 March 31 June 30 September 30 December 31 Required: Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).) Date $ 680,000 1,280,000 896,000 680,000 480,000 January 1 March 31 June 30 September 30 December 31 Accumulated expenditure Average accumulated X Answer is complete but not entirely correct. Expenditure Weight 680,000 x 1,280,000x 896,000 x 680,000 x 480,000 x $ 4,016,000 Amount is 2258 000 12/12 = 9/12 = 6/12 = 3/12 = 0/12 = Interest Rate $ Average 680,000✔ 960,000 448,000 170,000 0 $ 2,258,000 Capitalized Interest < Prev 8 of Ō # Next >

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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Current Attempt in Progress On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 10% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 102 (that is, at 102% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them. (a) Ignoring income taxes, calculate the…
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