Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 10, Problem 16E
1.
To determine
Calculate the amount of interest capitalized related to the construction of the building.
2.
To determine
Calculate the weighted average accumulated expenditure and the amount of interest capitalized on the building.
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Interest During Construction
Matrix Inc. borrowed $1,100,000 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 $258,000 (includes cost of purchasing land of $150,000)
May 1
310,000
July 1
450,000
October 31 280,000
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.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
24
42,000 x
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
654,000 x
Compute the amount of interest capitalized on the building
52,320 x
Interest During Construction
Matrix Inc. borrowed $1,100,000 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 $258,000 (includes cost of purchasing land of $150,000)
May 1
320,000
July 1
450,000
October 31 280,000
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.
Required:
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:
Compute weighted average accumulated expenditures
Compute the amount of interest capitalized on the building
Interest During Construction
Matrix Inc. borrowed $1,100,000 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
$258,000
(includes cost of purchasing land of $150,000)
May 1
320,000
July 1
450,000
October 31
275,000
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.
Required:
Compute the amount of interest capitalized related to the construction of the building.
$
If the expenditures are assumed to have been incurred evenly throughout the year:Compute weighted average accumulated expenditures
$
Compute the amount of interest capitalized on the building
$
Chapter 10 Solutions
Intermediate Accounting: Reporting And Analysis
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- 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 buildingarrow_forwardOn January 3, 2020, Mercury Company began self-constructing an asset that qualified for interest capitalization. On January 5, Mercury borrowed $300,000 on an 8% construction loan. In addition, Mercury had $400,000 of 6% notes payable and $600,000 of 9% bonds payable outstanding. By December 31, expenditures (occurring evenly throughout the year) of $900,000 had been made on the asset. Investment of unused funds during the year yielded $1,200 of interest revenue.Required:Compute the amount of interest that should be capitalized during 2020.arrow_forwardSulo Company had the following borrowings during 2021. The borrowing were made for general purposes but the proceeds were used to finance the construction of new building. 12% bank loan – Principal – 3,000,000; Interest – 360,000 14% long term loan – Principal -5,000,000; Interest – 700,000 The construction began on January 1, 2021 and was completed on December 31, 2021. Expenditures on the building were 2,000,000 on January 1, 2,000,000 on June 30 and 1,000,000 in December 31. Required: Compute the cost of the building.arrow_forward
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