Interest Costs During Construction Comprehensive Illustration: On November 1, 2016, Shalla Company contracted Pfeifer Construction Co. to construct a building for $1,400,000 on land costing $100,000 (purchased from the contractor and included in the first payment). Shalla made the following payments to the construction company during 2017 January 1 - $210,000 March 1 - $300,000 May 1 - $540,000 December 31- $450,000 Total: $1,500,000 Interest costs during construction: Pfeifer Construction completed the building, ready for occupancy, on December 31, 2017. Shalla had the following debt outstanding at December 31, 2017 Specific Construction Debt: 1. 15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2016 with interest payable annually on December 31 $750,000 Other Debt: 2. 10% 5-year note payable, dated December 31, 2013 with interest payable annually on December 31 $550,000 3. 12%, 10-year bonds issued December 31, 2012, with interest payable annually on December 31 $600,000 INSTRUCTIONS: COMPUTE WEIGHTED-AVERAGE ACCUMULATED EXPENDITURES FOR 2017, THE ACTUAL INTEREST AND THE AVAIDABLE INTEREST.
Interest Costs During Construction
Comprehensive Illustration: On November 1, 2016, Shalla Company contracted Pfeifer Construction Co. to construct a building for $1,400,000 on land costing $100,000 (purchased from the contractor and included in the first payment). Shalla made the following payments to the construction company during 2017
January 1 - $210,000
March 1 - $300,000
May 1 - $540,000
December 31- $450,000
Total: $1,500,000
Interest costs during construction:
Pfeifer Construction completed the building, ready for occupancy, on December 31, 2017. Shalla had the following debt outstanding at December 31, 2017
Specific Construction Debt: 1. 15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2016 with interest payable annually on December 31 $750,000
Other Debt: 2. 10% 5-year note payable, dated December 31, 2013 with interest payable annually on December 31 $550,000
3. 12%, 10-year bonds issued December 31, 2012, with interest payable annually on December 31 $600,000
INSTRUCTIONS: COMPUTE WEIGHTED-AVERAGE ACCUMULATED EXPENDITURES FOR 2017, THE ACTUAL INTEREST AND THE AVAIDABLE INTEREST.
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