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 $ I 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

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 $ I 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On December 31, 2023, Cheyenne Inc., a public company, borrowed $3 million at 11% payable annually to finance the construction of a new building. In 2024, the company made the following expenditures related to this building structure: March 1, $519,000; June 1, $630,000; July 1, $1.5 million (of which $412,000 was for the roof); December 1, $1.5 million (of which $728,000 was for the building HVAC). Additional information follows: 1. 2. 3. Other debt outstanding: $5-million, 10-year, 12% bond, dated December 31, 2016, with interest payable annually $1.5-million, six-year, 10% note, dated December 31, 2020, with interest payable annually The March 1, 2024 expenditure included land costs of $147,000. Interest revenue earned in 2024 on the unused idle construction loan amounted to $52,400. Determine the interest amount that could be capitalized in 2024 in relation to the building construction. (Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g.…
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.
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 $ 1,080,000 March 1, 2021 900,000 June 30, 2021 320,000 October 1, 2021 700,000 January 31, 2022 720,000 April 30, 2022 1,035,000 August 31, 2022 1,800,000 On January 1, 2021, the company obtained a $3 million construction loan with a 10% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $5,000,000 and $7,000,000 with interest rates of 5% and 8%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required:1. Calculate the amount of interest that Mason should…
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 montns 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: 1. Compute the amount of interest expense Kit would capitalize related to the construction of the building. 2. Compute the amou1nt 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?
Klutlan Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Klutlan does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $2,000,000, 8% note $8,000,000, 5% bonds Construction expenditures incurred were as follows: July 1, 2018 $520,000 September 30, 2018 600,000 November 30, 2018 600,000 January 30, 2019 540,000 The company's fiscal year-end is December 31. Question The total value of the warehouse at the end of construction would be: a $2,288,000 b $2,317,702 c $1,745,760 d $2,260,000
Crane Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6300000 on March 1, $5340000 on June 1, and $8850000 on December 31. Crane Company. borrowed $3170000 on January 1 on a5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year $6350000 note payable and an 11%, 4-year, $12050000 note payable. What is the actual interest for Crane Company?
On January 2, 2020, Bonita Industries began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2021. Expenditures for the construction were as follows: January 2, 2020 $ 609000 September 1, 2020 1802400 December 31, 2020 1802400 March 31, 2021 1802400 September 30, 2021 1203000 Bonita Industries borrowed $3400000 on a construction loan at 12% interest on January 2, 2020. This loan was outstanding during the construction period. The company also had $13320000 in 9% bonds outstanding in 2020 and 2021.The interest capitalized for 2020 was: A)$505656 B)$108882 C)$145176 D)$289368
IvanhoeFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,500,000 on January 1, 2020. Ivanhoe expected to complete the building by December 31, 2020. Ivanhoe has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,200,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,150,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,100,000 Assume that Ivanhoe completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,920,000, and the weighted-average amount of accumulated expenditures was $7,560,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and…
Interest During Construction Matrix Inc. borrowed $1,000,000 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 $252,000 (includes cost of purchasing land of $150,000) May 1 310,000 July 1 420,000 October 31 276,000 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. 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:a. Compute weighted average accumulated expenditures b. Compute the amount of interest capitalized on the building
2. On Dec 31, 2020 Laf borrowed $3,000,000 at 12% payable annually to finance construction of a new building. In 2021 the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; Dec 1, $1,500,000. The building was completed on April 30, 2022 Other debt outstanding 10 year, $4,000,000, 13% bond, December 31, 2014, interest payable annually 6 year, 10%, $1,600,000 note dated December 31,2018, interest payable March 1, 2021 an additional expenditure was made towards construction of $150,000 Interest revenue earned in 2021 $49,000 What is the weighted average interest rate of debt other than the specific borrowing loan? (Round of interest rate to nearest whole number, so if you calculated .1412 you would write 14) The firm does not need to use the WAIR rate in calculating capitalized interest in order for it to exist Thank you Brenda
The following transactions pertain to the general borrowings made during 2021 by Owshi Company in connection with the construction of the company’s new warehouse: • 8% bank loan- $2,400,000 • 6% short-term note- $1,600,000 • 8% long-term note- $2,000,000 The construction started on January 1, 2021 and the warehouse was completed on December 31, 2021. Expenditures on the warehouse were as follows: • January 1- $400,000 • March 31- $1,000,000 • June 30- $1,200,000 • September 30- $1,000,000 • December 31- $400,000 How much is the capitalizable borrowing cost of Owshi Company?
am.103.