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

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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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: 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. Next Level In the current period, the capitalization of interest ; in future period the effect of capitalized interest is to .
On January 1, 2019, Q Co. contracted for the construction of a building for 20,000,000 on land that it had previously purchased. The building was completed on December 31, 2019. The following payments were made to the contractor: Payment date AmountJanuary 1. 2,000,000March 1. 6,000,000August 30. 10,000,000December 1. 2,000,000 The following represents the borrowings of Q Co. as of December 31, 2019:• 10%, 7,000,000, 4-year note dated January 1, 2019 with simple interest payable annually, specifically borrowed to finance the construction project. Interest income earned on the temporary investment of the proceeds is 120,000.• 10%, 10,000,000, 10-year note dated January 1, 2019 with interest payable annually.•12.5%, 15,000,000, 10-year note dated December 31, 2018 with interest payable annually. The building is estimated to have useful life of 20 years and a residual value of 1,482,500. The Building is…
interest During Construction Sunfish Company is constructing a building that qualifies for interest capitalization. It is build between January 1 and December 31, 2021. Sunfish made the following expenditures related to this building: 370,000 1-May $ 1-Jun 5 410,000 1-Aug $ 1-Dec $ 500,000 130,000 The company borrowed $550,000 at 11% to help finance the project. In addition, Sunfish had outstanding borrowings of $2 million at 7% and $1 million at 8%. Required: 1 Compute the amount of interest to be capitalized related to the construction of the building. 2 Next Level: What effect does the interest capitalization have on the company's financial statements after it completes the building?
On January 1, 2023, Cake Company had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset: 12% bank loan (1.5 years)-P1,000,000 10% bank loan (3-year)-P8,000,000 Expenditures made on the qualifying asset were as follows: Jan. 1-P5,000,000 March 1-P4,000,000 August 31-P3,000,000 December 1-P2,000,000 Construction was completed on December 31, 2023. How much is the cost of the qualifying asset on initial recognition?
Thornton Industries began construction of a warehouse on July 1, 2021. The project was completed on March 31, 2022. No new loans were required to fund construction. Thonton does have the following two interest-bearing liabilities that were outstanding throughout the construction perlod: $3,000, 000, 12% note $7,000, 000, 7X bonds Construction expenditures Incurred were as follows: July 1, 2021 Septenber 30, 2021 November 30, 2021 January 30, 2022 $ 700,000 990,000 990, 000 930,000 The company's fiscal year-end is December 31. Required: Calculate the amount of interest capitallized for 2021 and 2022. Complete this question by entering your answers in the tabs below. 2021 2022
Thornton Industries began construction of a warehouse on July 1, 2021. The project was completed on March 31, 2022. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $2,000,000, 8% note $8,000,000, 4% bonds Construction expenditures incurred were as follows: July 1, 2021 $ 400,000September 30, 2021 600,000November 30, 2021 600,000January 30, 2022 540,000 The company’s fiscal year-end is December 31.Required:Calculate the amount of interest capitalized for 2021 and 2022.
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?
am.103.
Requirements: - Compute the capitalizable borrowing cost on 2020 - Compute the total cost of the building on 2020 - Compute the interest expense on 2020
Madrigal Company constructed a building for its own use. Construction started on January 3, 2021 and the building was completed on December 31, 2021. The total construction costs of P1,560,000 were incurred evenly during the construction period. The company has the following outstanding obligations prior to the start of construction.Specific borrowing ---P700,000, 16% due January 1, 2023General borrowing ---P500,000, 18% due December 31, 2024How much interest is capitalized?
Maragondon Company had the following borrowings during 2018. The borrowings were made for general purposes but the proceeds were used in part to finance the construction of a new building: Principal Interest 12% bank loan 10,000,000 1,200,000 15% long-term loan 20,000,000 3,000,000 30,000,000 4,200,000 The construction began on January 1, 2018 and was completed on December 31, 2018. Expenditures on the building were made as follows:January 1 8,000,000June 30 8,000,000December 31 4,000,000 The capitalizable borrowing cost isa. 1,680,000b. 1,400,000c. 4,200,000d. 1,620,000 What is the solution for the option A?
On 4/1/22, Little Inc. borrowed funds on a 9%, one-year note to finance the construction of a new building to be used for its own purposes. Construction on the project began on 5/1/22 and was completed on 9/1/22. Rounded to the nearest whole month, how many total months in 2022 should interest be capitalized under the interest capitalization rules? 0 months 4 months 5 months 8 months 9 months 12 months