Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 11, Problem 11.2MC
On January 1, Year 1, Bluebird Inc. borrowed $10 million at a rate of 9% for 5 years and began construction of its new regional office building. Bluebird has no other debt. During Year 1, Bluebird’s weighted-average accumulated construction expenditures totaled $3,750,000. What should Bluebird report as interest expense on its income statement for Year 1?
- a. $337,500
- b. $500,000
- c. $562,500
- d. $900,000
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Martin Ltd, in the first year of its operations, reported the following information regarding its operations:
a. Earnings before tax for the year was $2,500,700 and the tax rate was 38%
b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700.
c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out
was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is
the amount deductible.
d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes.
In the second year of its operations, Martin Ltd. reported the following information:
a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%.
b. Depreciation was $240.700, and the CCA was $740,700. Net book value at year-end was $1,440.700,…
On January 1, 2024, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2025. Construction expenditures for 2024, which were incurred evenly throughout the year, totaled $6,900,000. Marjlee had the following debt obligations which were outstanding during all of 2024:
Construction loan, 10%
$ 1,725,000
Long-term note, 9%
2,300,000
Long-term note, 6%
4,600,000
Required:
Calculate the amount of interest capitalized in 2024 for the building using the specific interest method.
During 2021, New Era Inc. constructed assets costing $1,000,000. The weighted-average accumulated expenditures on these assets during 2021 was $600,000.
To help pay for construction, $440,000 was borrowed at 10% on January 1, 2021 , and funds not needed for construction were temporarily invested in short-term securities, yielding $9,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a $500,000, 10-year, 9% note payable dated January 1, 2015.
What is the amount of interest that should be capitalized by New Era Inc. during 2021? $
Chapter 11 Solutions
Intermediate Accounting
Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2QCh. 11 - Prob. 11.3QCh. 11 - Prob. 11.4QCh. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6QCh. 11 - Prob. 11.7QCh. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9QCh. 11 - Prob. 11.10Q
Ch. 11 - Prob. 11.11QCh. 11 - What is the maximum amount of interest to be...Ch. 11 - Prob. 11.13QCh. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Do firms expense all costs incurred after the...Ch. 11 - Prob. 11.17QCh. 11 - Prob. 11.18QCh. 11 - When using the double-declining balance...Ch. 11 - Prob. 11.20QCh. 11 - Will a firm recognize a loss on the income...Ch. 11 - Prob. 11.22QCh. 11 - Prob. 11.23QCh. 11 - Prob. 11.24QCh. 11 - Prob. 11.25QCh. 11 - Differentiate between a leasehold and a leasehold...Ch. 11 - Prob. 11.27QCh. 11 - Prob. 11.28QCh. 11 - Prob. 11.29QCh. 11 - Prob. 11.30QCh. 11 - Prob. 11.31QCh. 11 - Prob. 11.32QCh. 11 - Prob. 11.33QCh. 11 - Prob. 11.34QCh. 11 - Prob. 11.35QCh. 11 - Prob. 11.36QCh. 11 - Prob. 11.37QCh. 11 - Prob. 11.38QCh. 11 - Prob. 11.39QCh. 11 - Prob. 11.40QCh. 11 - In a nonmonetary exchange does a firm record the...Ch. 11 - Prob. 11.42QCh. 11 - Prob. 11.43QCh. 11 - Prob. 11.44QCh. 11 - Prob. 11.45QCh. 11 - Prob. 11.1MCCh. 11 - On January 1, Year 1, Bluebird Inc. borrowed 10...Ch. 11 - Prob. 11.3MCCh. 11 - Prob. 11.4MCCh. 11 - Prob. 11.5MCCh. 11 - Prob. 11.6MCCh. 11 - Prob. 11.7MCCh. 11 - Prob. 11.8MCCh. 11 - Determining Acquisition Cost. Haply, Inc. incurred...Ch. 11 - Determining Acquisition Cost. Tarpley, Inc....Ch. 11 - Prob. 11.3BECh. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.6BECh. 11 - Prob. 11.7BECh. 11 - Prob. 11.8BECh. 11 - Depreciation, Straight-Line Method. Hermit...Ch. 11 - Prob. 11.10BECh. 11 - Prob. 11.11BECh. 11 - Prob. 11.12BECh. 11 - Prob. 11.13BECh. 11 - Derecognition Due to Abandonment. Greene Corp....Ch. 11 - Prob. 11.15BECh. 11 - Prob. 11.16BECh. 11 - Prob. 11.17BECh. 11 - Prob. 11.18BECh. 11 - Prob. 11.19BECh. 11 - Prob. 11.20BECh. 11 - Leasehold Improvements. At the beginning of its...Ch. 11 - Determining Acquisition Cost. St Charles Flooring...Ch. 11 - Prob. 11.2ECh. 11 - Prob. 11.3ECh. 11 - Acquiring an Asset with a Note Payable (Deferred...Ch. 11 - Prob. 11.5ECh. 11 - Prob. 11.6ECh. 11 - Capitalization of Interest, Specific and General...Ch. 11 - Prob. 11.8ECh. 11 - Prob. 11.9ECh. 11 - Capitalization of Interest, Specific and General...Ch. 11 - Prob. 11.11ECh. 11 - Expensing versus Capitalizing ExpendituresAnalysis...Ch. 11 - Depreciation Methods, Disposal. Kurtis Koal...Ch. 11 - Prob. 11.14ECh. 11 - Depreciation Methods, Partial-Year Depreciation....Ch. 11 - Prob. 11.16ECh. 11 - Depreciation Methods. Ace Manufacturing, Inc....Ch. 11 - Prob. 11.18ECh. 11 - Depreciation Methods, Partial-Year Depreciation,...Ch. 11 - Prob. 11.20ECh. 11 - Partial-Year Depreciation, Sale of Property,...Ch. 11 - Prob. 11.22ECh. 11 - Disclosure of Property, Plant, and Equipment. Use...Ch. 11 - Disclosure of Property, Plant, and Equipment,...Ch. 11 - Prob. 11.25ECh. 11 - Research and Development Activities. During the...Ch. 11 - Prob. 11.27ECh. 11 - Goodwill Computation, Acquisition of Intangibles,...Ch. 11 - Prob. 11.29ECh. 11 - Prob. 11.30ECh. 11 - Prob. 11.31ECh. 11 - Prob. 11.32ECh. 11 - Prob. 11.33ECh. 11 - Prob. 11.34ECh. 11 - Prob. 11.35ECh. 11 - Prob. 11.36ECh. 11 - Prob. 11.37ECh. 11 - Exchanges Lacking Commercial Substance, Cash...Ch. 11 - Prob. 11.39ECh. 11 - Prob. 11.40ECh. 11 - Prob. 11.41ECh. 11 - Prob. 11.42ECh. 11 - Note Payable Exchanged for a Plant Asset (Deferred...Ch. 11 - Prob. 11.2PCh. 11 - Prob. 11.3PCh. 11 - Depreciation Methods and Depreciation Schedules....Ch. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Goodwill and Bargain Purchase Computations. The...Ch. 11 - Prob. 11.8PCh. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Prob. 11.11PCh. 11 - Judgment Case 1: Property, Plant, and Equipment:...Ch. 11 - Prob. 2JCCh. 11 - Prob. 1FSCCh. 11 - Surfing the Standards Cases Surfing the Standards...Ch. 11 - Prob. 2SSCCh. 11 - Surfing the Standards Case 3: Involuntary...Ch. 11 - Prob. 4SSCCh. 11 - Prob. 5SSCCh. 11 - Prob. 1BCCCh. 11 - Prob. 2BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On January 1, 2024, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2025. Construction expenditures for 2024, which were incurred evenly throughout the year, totaled $5,400,000. Marjlee had the following debt obligations which were outstanding during all of 2024: Construction loan, 12% $ 1,350,000 Long-term note, 11% 1,800,000 Long-term note, 8% 3,600,000 1. Calculate the amount of interest capitalized in 2024 for the building using the specific interest method.arrow_forwardOn January 1, 2024, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2025. Construction expenditures for 2024, which were incurred evenly throughout the year, totaled $9,900,000. Marjlee had the following debt obligations which were outstanding during all of 2024: Construction loan, 108 Long-term note, 9 Long-term note, 68 $ 2,475,000 3,300,000 6,600,000 Required: Calculate the amount of Interest capitalized in 2024 for the building using the specific interest method. Interest capitalizedarrow_forwardConcord Corporation is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6490000 on March 1, $5270000 on June 1, and $8250000 on December 31. Concord Corporation borrowed $3180000 on January 1 on a 5-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, $11950000 note payable.What is the weighted-average interest rate used for interest capitalization purposes? 10.85% 10.50% 11.00% 10.65%arrow_forward
- Culver Inc. has a fiscal year ending April 30. On May 1, 2023, Culver borrowed $10 million at 11% to finance construction of its own building. Repayments of the loan are to begin the month after the building's completion. During the year ended April 30, 2024, expenditures for the partially completed structure totalled $7 million. These expenditures were incurred evenly throughout the year. Interest that was earned on the part of the loan that was not expended amounted to $482,000 for the year. For situation 3, how much should be shown as capitalized borrowing costs on Culver's financial statements at April 30, 2024? (If an answer is zero, please enter O. Do not leave any fields blank.) Capitalized borrowing $arrow_forwardMozely Company borrowed $400,000 on a 10 percent note payable to finance a new warehouse Mozely is constructing for its own use. The only other debt on Mozely's books is a $600,000, 12 percent mortgage payable on an office building. At the end of the current year, average accumulated expenditures on the new warehouse totaled $475,000. Mozely should capitalize interest for the current year in the amount of: A. $40,000 B. $47,500 C. $49,000 D. $52,250arrow_forwardVishnuarrow_forward
- Crafty Inc. borrowed $10,000 with a five-year 11.26% annual interest rate on 10/1/20X1. On their year-end financial statements dated 12/31/20X1, what amount should be reflected for interest expense? Input your response rounded to a whole number, without commas and without dollar signs. Your Answer: Answerarrow_forwardGrouper, Inc. has a fiscal year ending April 30. On May 1, 2020, Grouper borrowed $9,912,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2021, weighted-average accumulated expenditures were $3,469,200. Interest earned on the unexpended portion of the loan amounted to $644,280 for the year. How much should be shown as capitalized interest on Grouper's financial statements at April 30, 2021? Capitalized interest on Grouper's financial statements 190806arrow_forward! Required information [The following information applies to the questions displayed below.] On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $51,000 face value, four-year term note that had an 7 percent annual interest rate. The note is to be repaid by making annual cash payments of $15,057 that include both interest and principal on December 31 of each year. Brown used the proceeds from the loan to purchase land that generated rental revenues of $27,540 cash per year. Required a. Prepare an amortization schedule for the four-year period. (Round your answers to the nearest whole dollar amount.) Year Year 1 Year 2 Year 3 Year 4 Principal Balance on January 1 BROWN CO. Amortization Schedule Applied to Interest Cash Payments December 31 Applied to Principal Principal Balance End of Periodarrow_forward
- .arrow_forwardHelp!!arrow_forwardNovak, Inc. has a fiscal year ending April 30. On May 1, 2020, Novak borrowed $10,728,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2021, weighted-average accumulated expenditures were $3,754,800. Interest earned on the unexpended portion of the loan amounted to $697,320 for the year.How much should be shown as capitalized interest on Novak’s financial statements at April 30, 2021? Capitalized interest on Novak’s financial statements $arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENTPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
What is Fund Accounting?; Author: Aplos;https://www.youtube.com/watch?v=W5D5Dr0j9j4;License: Standard Youtube License