On January 1, 2020, Indian river groves began construction of a new citrus processing plant. Theautomated plant was finished and ready for use on September 30, 2021. Expenditures for theconstruction were as follows:Jan 1, 2020.Sept 1, 2020.Dec 31, 2020March 31,2021. $1800,000Aug 31, 2021.$600,000$1800,000$1800,000$1200,000Indian river groves borrowed $800,000 at 10% interest rate from a bank on Jan 1, 2020specifically to finance this construction. In addition, it as has two other debt outstandingthroughout the entire construction. A) $1500,000, 8%, 10 years bonds payable and B)$3,200,000, 10%, 5 years note payable. Fiscal year-end is Dec 31.IInstruction:A. What are the weighted-average accumulated expenditures for 2020 and 2021,respectively?B. How much interest should be capitalized in 2020? Show your calculation.

A... Weighted Average Expense Jan2 = Time in Month taken / Total Month x Expense of Asset…

nstruction were as follows: n 1, 2020. $600,000 $1800,000 $1800,000 arch 31,2021. $1800,000 $1200,000 pt 1, 2020. ec 31, 2020 g 31, 2021. dian river groves borrowed $800 000 at 10% interest rato from a bn

nstruction were as follows: n 1, 2020. $600,000 $1800,000 $1800,000 arch 31,2021. $1800,000 $1200,000 pt 1, 2020. ec 31, 2020 g 31, 2021. dian river groves borrowed $800 000 at 10% interest rato from a bn

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

On January 1, 2020, Indian river groves 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:
Jan 1, 2020.
Sept 1, 2020.
Dec 31, 2020
March 31,2021. $1800,000
Aug 31, 2021.
$600,000
$1800,000
$1800,000
$1200,000
Indian river groves borrowed $800,000 at 10% interest rate from a bank on Jan 1, 2020
specifically to finance this construction. In addition, it as has two other debt outstanding
throughout the entire construction. A) $1500,000, 8%, 10 years bonds payable and B)
$3,200,000, 10%, 5 years note payable. Fiscal year-end is Dec 31.
I
Instruction:
A. What are the weighted-average accumulated expenditures for 2020 and 2021,
respectively?
B. How much interest should be capitalized in 2020? Show your calculation.

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