3rd Edition

ISBN: 9780136946465

Author: SANNELLA

Publisher: VST

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Textbook Question

Chapter 11, Problem 11.10E

Capitalization of Interest, Specific and General Debt, Computing Weighted-Average Accumulated Expenditures, Journal Entries, IFRS. Assume that the Yawyag Corporation in E11-8 is an IFRS reporter and complete the following:

Required

a. Compute the weighted-average accumulated expenditures for the current year.
b. Compute the amount of interest related to the construction project and actual interest cost for the current year.
c. Indicate the amount of total interest to be capitalized and the amount of interest expense for the year.
d. Prepare the journal entry to record the December 31 interest payment Assume that the interest is paid in cash and that any interest capitalized is recorded in the construction in progress account.

E11-8 Capitalization of Interest, Specific and General Debt, Computing Weighted-Average Accumulated Expenditures, Journal Entries. Yawyag Corporation engaged Sir Peter, Inc. to design and construct a manufacturing facility. Construction began on January 2 and was completed on December 31 of the current year. The following payments were made to the contractor during the year:

Date	Amount
January 2	$2,400,000
August 1	1,800,000
October 1	3,600,000
December 1	1,200,000

To specifically finance the project, Yawyag issued $2 800,000 of 3-year, 5% notes payable on January 2. Interest is payable annually on December 31 each year. Prior to the commencement of the latest construction project, Yawyag had other debt in its capital structure. All general debt is outstanding as of the beginning of the current year. The general debt consists of $5,000,000 par value, 6% bonds payable, and a $1,000,000, 9% note payable. Both debt instruments require annual interest payments each December 31.

Required

a. Compute the weighted-average accumulated expenditures for the current year.
b. Compute the amount of avoidable interest and actual interest cost for the current year.
c. Indicate the amount of total interest to be capitalized and the amount of interest to expense for the year.
d. Prepare the journal entry to record the December 31 interest payments. Assume that the interest is paid in cash and that any interest capitalized is recorded in the Construction in Progress account.

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Chapter 11, Problem 11.9E

Chapter 11, Problem 11.11E

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Chapter 11 Solutions

EBK INTERMEDIATE ACCOUNTING

Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

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Solution Summary: The author concludes that the weighted average accumulated expenditure for the current year is 4,150,000.

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