Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 11, Problem 11.5BE
To determine
The amount of interest to be capitalized during the year.
Given information:
Amount of notes payable issued is $ 2,200,000.
Time period is 2 years.
Interest rate is 8%.
Interest income earned is $3,000.
Expenditures are given for the 1st year.
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This topic is about borrowing costs. Please choose the letter of the correct answer.
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?
Sheffield Corp. is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6470000 on March 1, $5340000 on June 1, and $7950000 on December 31. Sheffield Corp. borrowed $3250000 on January 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 3-year, $6450000 note payable and an 9%, 4-year, $12350000 note payable. What is the weighted-average interest rate used for interest capitalization purposes
Chapter 11 Solutions
Intermediate Accounting
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