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, 5986,000; 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 loans 340,000 12% 5 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 Expenditures Months outstanding Accum. Expenditures January 11 July 11 $ 102.000 986.000 125 6 102.000 493.000 September 1 2.720.000 4 906.667 December 31 7.174,000 0~ Weighted avg accum expenditures 1.501.667 Calculation of Avoidable Interest Debt Weighted Avg. Interest Avoidable Category Accum. Expenditures Rate Interest Specific Debt s 340.000 12% 5 40.800 General Debt 1.161.667 15% 1.501.667 174.250 215.050 Amount of interest to be capitalized during the year: $ 215,050 b. Calculate the amount of interest expense for the year. 5 29,750 c. Prepare the summary journal entry for the year to record the construction expenditures and interest, assuming that construction is not complete on December 31. Assume all payments are in cash. Dec. 31 Building Interest Expense Cash Account Name To record.construction expenditures and interest Dr. 11.156,250 Cr. 29.750 0 7.174.000 x

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 2EA: Consider the following accounts and determine if the account is a current liability, a noncurrent...