Computing and Recording Interest Capitalization The following information is from Bowin Inc. for a long-term construction...

Computing and Recording Interest Capitalization

The following information is from Bowin Inc. for a long-term construction project that is expected to be completed in January 2021. The construction project is for a building intended for the company’s own use. The capital expenditure on January 1, 2020, is for the purchase of land for the building site. No new construction loans were opened for the project in 2020. All debt was outstanding for the full year.

Capital Expenditures for 2020

Date	Amount
Jan. 1, 2020	$ 24,000
Mar. 31, 2020	720,000
June 30, 2020	1,440,000
Nov. 30, 2020	720,000

Outstanding Debt in 2020

Debt	Debt Amount	Interest Rate
Note payable	$800,000	8%
Note payable	640,000	8%
Bond payable	1,600,000	10%
Note payable	400,000	9%

Answer the following questions:
a. Compute interest to be capitalized and the interest to be expensed in 2020.
b. Prepare the entry to record the construction expenditures and interest for 2020.
c. Prepare the entry for depreciation in 2021 assuming that the project is completed on January 1, 2021. Assume that the building has a useful life of 30 years, and that the company uses the straight-line depreciation method.

Note: Do not round until your final answers, then round to nearest whole number.

a.

Amount of interest to be capitalized	Answer
Amount of interest to expense

b.

Land

Construction in process

cash and payables

c.

Expert Solution

ekkarill92 answered 2 years ago

Computing and Recording Interest Capitalization Weld Corporation is constructing a plant for its own use. Weld...

Computing and Recording Interest Capitalization 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, $30,000; July 1, $290,000; September 1, $800,000; and December 31, $2,110,000. The following debts were outstanding throughout the current year. Debt Amount Construction note, 12% $100,000 Short-term note payable, 15% 400,000 Accounts payable (noninterest-bearing) 400,000 Answer the following questions, rounding your answers to the nearest whole dollar....

Computing and Recording Proceeds from the Sale of PPE The following information was provided in the...

Computing and Recording Proceeds from the Sale of PPE The following information was provided in the 2018 10-K of Hilton Worldwide Holdings, Inc. Note 7: Property and Equipment ($ millions) 2018 2017 Property and equipment, gross $1,102 $1,044 Accumulated depreciation (625) (585) Property and equipment, net 477 459 Note 7 also revealed that depreciation expense on property and equipment totaled $70 million in 2018. The cash flow statement reported that expenditures for property and equipment totaled $94 million in 2018...

1. Cooper, Inc., is constructing a building that qualifies for interest capitalization. The following information...

1. Cooper, Inc., is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2013-December 31, 2014 Expenditures on project (incurred evenly): 2013 $30,000 2014 $50,000 Amounts borrowed and outstanding (all debt incurred January 1, 2013) $10,000 at 10% (specifically for the construction project) $18,000 at 11% (general debt) $30,000 at 13% (general debt) Required: a. Compute the amount of interest that should be capitalized in 2013 and 2014. (Round interest rates...

Current Portion of Long-Term Debt PepsiCo, Inc., reported the following information about its long-term debt in...

Current Portion of Long-Term Debt PepsiCo, Inc., reported the following information about its long-term debt in the notes to a recent financial statement (in millions): Long-term debt is comprised of the following: December 31 Current Year Preceding Year Total long term-debt $33,284 $28,897 Less current portion (4,071) (5,076) Long-term debt $29,213 $23,821 a. How much of the long-term debt was disclosed as a current liability on the current year's December 31 balance sheet? b. How much did the total current...

Required information Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information...

Required information Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information applies to the questions displayed below.] Grass Security, which began operations in 2017, invests in long-term available-for-sale securities. Following is a series of transactions and events determining its long-term investment activity. 2017 Jan. 20 Purchased 2,900 shares of Johnson & Johnson at $22.40 per share plus a $430 commission. Feb. 9 Purchased 3,100 shares of Sony at $48.10 per share plus a $415 commission....

What are the short-term and long-term effects on the environment that can arise from the construction...

What are the short-term and long-term effects on the environment that can arise from the construction of dams?

Interest during construction Jones company is constructing a production complex that qualifies for interest capitalization. The...

Interest during construction Jones company is constructing a production complex that qualifies for interest capitalization. The following information is available: • capitalization period: January 1, 2016 to June 30, 2017 • expenditures on project 2016: January 1-$468,000 May 1-$489,000 October 1-$648,000 2017 March 1-$1,452,000 June 30-$588,000 • amounts borrowed and outstanding: $1.4 million borrowed at 10%, specifically for the project $7 million borrowed on July 1, 2105, at 12% $19 million borrowed on January 1, 2011, at 6% Required: Note:...

Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The...

Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 $ 516,000 May 1 477,000 October 1 648,000 2020: March 1 1,404,000 June 30 684,000 Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $8 million borrowed on July 1, 2018, at 12% $13 million borrowed on January 1, 2017, at...

interest During Construction Zimmer Company is constructing a production complex that qualifies for interest capitalization. The...

interest During Construction Zimmer Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016, to June 30, 2017 Expenditures on project: 2016: January 1 $ 612,000 May 1 573,000 October 1 492,000 2017: March 1 1,404,000 June 30 612,000 Amounts borrowed and outstanding: $1.5 million borrowed at 10%, specifically for the project $7 million borrowed on July 1, 2015, at 12% $17 million borrowed on January 1, 2011, at...

Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information applies to...

Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information applies to the questions displayed below.] Grass Security, which began operations in 2017, invests in long-term available-for-sale securities. Following is a series of transactions and events determining its long-term investment activity. 2017 Jan. 20 Purchased 1,500 shares of Johnson & Johnson at $21.00 per share plus a $290 commission. Feb. 9 Purchased 1,700 shares of Sony at $46.70 per share plus a $275 commission. June 12...

Question