Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 11.6E
a.
To determine
Amount of interest to be capitalized in current year.
Given Information:
Cost of plant is $8,500,000.
Accumulated expenditures are $4,250,000.
Amount of note payable used to finance the plant is $2,000,000.
Bond used to finance local transmitters amounted $1,800,000 and carried interest at 12%.
Note payable used to finance the construction of corporate headquarters amounted $4,200,000 and carried interest at 13%.
b.
To determine
The amount of interest to be expensed in current year.
c.
To determine
To prepare:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Weld Corporation is constructing a plant for its own use. Weld capitalizes interest on an annual basis. The following expenditures are made during the current year: January 1, $102,000; July 1, $986,000; September 1, $2,720,000; and December 31, $7,174,000. The following debts were outstanding throughout the current year.
Debt
Construction note, 12%
Short-term note payable, 15%
Amount
$340,000
1,360,000
Accounts payable (noninterest-bearing) 1,360,000
Note: Round all of your answers to the nearest whole number or whole percentage point.
a. Compute the amount of interest to be capitalized during the year.
Calculation of Actual Interest
Debt
Debt Amount Interest rate
Interest
Amount
Specific Debt
Construction loan $ 340,000
12 % $
40,800
General Debt
Note payable
$ 1,360,000
15%
Total Actual Interest
$
204,000✔
244,800
Calculation of Weighted Average Accumulated Expenditures
Weighted Avg.
Date
January 1
July 1
$
Expenditures
102,000 ✔
986,000 ✔
Months
outstanding
Accum. Expenditures
12
$…
On January 1 of the current year, a company began construction of an office building to be used as its corporate headquarters. The
building was completed early in the following year Construction expenditures for the current year, which were incurred evenly
throughout the year, totaled $6,900,000. The company had the following debt obligations which were outstanding during all of the
current year
Construction loan, 10%
Long-term note, 9%
Long-term note, 6%
4
$1,725,000
2,300,000
4,600,000
Required:
Calculate the amount of interest capitalized in the current year for the building using the specific interest method.
terest capitalized
Jugular Company started construction on a building on January 1 of
the current year and completed construction on December 31 of the same year. The entity had only two interest-bearing notes outstanding during the year, and both of these notes were outstanding for all 12 months of the year.The following information is available:Average accumulated expenditures 2,500,000Ending balance in construction in progress beforecapitalization of interest 3,600,0006% note incurred specifically for the project 1,500,0009% long-term note 5,000,000What is the total cost of the building?a. 3,780,000b. 3,680,000c. 3,750,000d. 3,825,000
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 - Prob. 11.26QCh. 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 - In a nonmonetary exchange does a firm record the...Ch. 11 - Prob. 11.37QCh. 11 - Prob. 11.38QCh. 11 - Prob. 11.39QCh. 11 - Prob. 11.40QCh. 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 - Prob. 11.4ECh. 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. 11.41ECh. 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. 1FSACCh. 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. 6SSCCh. 11 - Prob. 1BCCCh. 11 - Prob. 2BCC
Knowledge Booster
Similar questions
- Larkspur Inc. is constructing a building. Construction began on March 1 and was completed on December 31. Expenditures were $732,000 on March 1, $976,000 on July 1, and $878,400 on December 1. Compute Larkspur's weighted-average accumulated expenditures for interest capitalization purposes. Weighted-Average Accumulated Expenditures %24arrow_forwardOn April 1, Paine Co. began construction of a small building. Payments of P120,000 were made monthly for four months beginning on April 1. The building was completed and ready for occupancy on August 1. For the purpose of determining the amount of interest cost to be capitalized, calculate the weighted-average accumulated expenditures on the building by completing the schedule below: Date Expenditures Capitalization Period Weighted-Average Expenditures _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____arrow_forwardWindsor Company is constructing a building Construction began on February 1 and was completed on December 31 . Expenditures were $1.980,000 on March 1.$1,320,000 on June 1 and $3,300,000 on December 31 . Windsor Company borrowed $1,100,000 on March 1 on a 5 -year, 10% note to help finance construction of the building. In addition. the company had outstanding all year a 12%,5-year, $2,200,000 note payable and an 11%,4-year, $3,850,000 note payable. Compute avoidable interest for Windsor Company. Use the weighted-average interest rate for interest capitalization purposes. Avoidable interest $arrow_forward
- Bonita Industries is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6440000 on March 1, $5260000 on June 1, and $8850000 on December 31. Bonita Industries borrowed $3190000 on January 1 on a 5-year, 11% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 3-year, $6440000 note payable and an 10%, 4-year, $12650000 note payable.What are the weighted-average accumulated expenditures? $9860000 $20550000 $8435000 $11700000arrow_forwardWindsor Company is constructing a building Construction began on February 1 and was completed on December 31 . Expenditures were $1.980,000 on March 1.$1,320,000 on June 1 and $3,300,000 on December 31 . Windsor Company borrowed $1,100,000 on March 1 on a 5 -year, 10% note to help finance construction of the building. In addition. the company had outstanding all year a 12%,5-year, $2,200,000 note payable and an 11%,4-year, $3,850,000 note payable. Compute avoidable interest for Windsor Company. Use the weighted-average interest rate for interest capitalization purposes. Avoidable interest $ I am following the steps provided in the earlier solution but my answer and this answer don't match and my practice says both are wrong. How do I get avoidable interest?arrow_forwardSheffield 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 purposesarrow_forward
- Bonita Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $3,960,000 on March 1, $2,640,000 on June 1, and $6,600,000 on December 31. Bonita Company borrowed $2,200,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $4,400,000 note payable and an 11%, 4-year, $7,700,000 note payable. Compute avoidable interest for Bonita Company. Use the weighted-average interest rate for interest capitalization purposes. (Round "Weighted-average interest rate" to 4 decimal places, e.g. 0.2152 and final answer to O decimal places, eg. 5,275.) Avoidable interest %24arrow_forwardRiverbed Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,620,000 on March 1, $1,080,000 on June 1, and $2,700,000 on December 31.Riverbed Company borrowed $900,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $1,800,000 note payable and an 11%, 4-year, $3,150,000 note payable. Compute avoidable interest for Riverbed Company. Use the weighted-average interest rate for interest capitalization purposes. (Round "Weighted-average interest rate" to 4 decimal places, e.g. 0.2152 and final answer to 0 decimal places, e.g. 5,275.)arrow_forwardA company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $680,000; March 31, $780,000; June 30, $580,000; October 30, $1,140,000. To help finance construction, the company arranged a 9% construction loan on January 1 for $1,060,000. The company's other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 10% and 8%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. Note: Enter your answers in whole dollars and not in millions. Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%). Date January 1 March 31 June 30 October 30 Accumulated expenditures Average accumulated expenditures Expenditure Amount X X X Weight Interest Rate % % "1 II = = Average…arrow_forward
- Crane Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,836,000 on March 1, $1,236,000 on June 1, and $3,038,370 on December 31.Crane Company borrowed $1,112,250 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,342,100 note payable and an 10%, 4-year, $3,467,800 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.) Weighted-average interest rate enter the weighted-average interest rate rounded to 2 decimal places %arrow_forwardMetlock Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,908,000 on March 1, $1,308,000 on June 1, and $3,015,990 on December 31. Compute Metlock's weighted-average accumulated expenditures for interest capitalization purposes. Weighted-average accumulated expenditures $arrow_forwardBonita Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,896,000 on March 1, $1,296,000 on June 1, and $3,025,000 on December 31. Bonita Company borrowed $1,089,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,327,000 note payable and an 11%, 4-year, $3,795,000 note payable. Compute avoidable interest for Bonita Company. Use the weighted-average interest rate for interest capitalization purposes. (Round weighted- average interest rate to 4 decimal places, e.g. 0.2152 and final answer to O decimal places, e.g. 5,275.) Avoidable interest $ Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education