Question
In: Accounting
On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building...
- On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building was completed on June 30, 2016. Cash outlays for the $5 million project were as follows:
2015
January 1 $1,000,000
March 1 $600,000
June 30 $800,000
September 30 $750,000
December 1 $600,000
2016
March 31 $800,000
June 30 $450,000 (final payment)
Total payments $5,000,000
On January 1, 2015 Costco obtained a $3 million dollar construction loan with a 5% interest rate. Costco’s other long-term debt consisted of $30 million 6% bonds and $20 million of 8% bonds. All debt was outstanding throughout 2015 and 2016.
- Calculate the amount of interest to be capitalized in 2015.
- Calculate the amount of interest to be capitalized in 2016.
- What is the final total capitalized cost of the warehouse?
- How much interest expense is reported in Costco’s Income Statement for both 2015 and 2016?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2021, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2021, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2022. Expenditures on the project were as follows:
January 1, 2021
$
326,000
September 1, 2021
$
477,000
December 31, 2021
$
477,000
March 31, 2022
$
477,000
September 30, 2022
$
326,000
Dreamworld had $5,900,000 in 12% bonds outstanding through both
years.
What was the final cost of Dreamworld's warehouse?
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2019. Expenditures on the project were as follows:
January 1, 2018
$
300,000
September 1, 2018
$
450,000
December 31, 2018
$
450,000
March 31, 2019
$
450,000
Dreamworld had the following debt obligations outstanding during
both years:
Construction loan,
10%
$500,000
Long-term note,
12% $2,500,000
Required: What would Dreamworld's capitalized
interest be in 2019 (assuming interest...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2019. Expenditures on the project were as follows:
January 1, 2018
$
300,000
September 1, 2018
$
450,000
December 31, 2018
$
450,000
March 31, 2019
$
450,000
Dreamworld had the following debt obligations outstanding during
both years:
Construction loan,
10%
$500,000
Long-term note,
12% $2,500,000
Required: What would Dreamworld's capitalized
interest be in 2018?
$50,000
None...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2019. Expenditures on the project were as follows:
January 1, 2018
$
300,000
September 1, 2018
$
450,000
December 31, 2018
$
450,000
March 31, 2019
$
450,000
Dreamworld had the following debt obligations outstanding during
both years:
Construction loan,
10%
$500,000
Long-term note,
12% $2,500,000
Required: What would Dreamworld's capitalized
interest be in 2019 (assuming interest...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018,
Dreamworld Co. began construction of a new warehouse. The building
was finished and ready for use on September 30, 2019. Expenditures
on the project were as follows:
January 1, 2018
$
336,000
September 1,
2018
$
504,000
December 31,
2018
$
504,000
March 31,
2019
$
504,000
September 30,
2019
$
336,000
Dreamworld had $6,800,000 in 10% bonds outstanding through both
years.
What was the final cost of Dreamworld's warehouse?
On January 1, 2016, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2016, Dreamworld Co. began construction of
a new warehouse. The building was finished and ready for use on
September 30, 2017. Expenditures on the project were as
follows:
January 1, 2016 $300,000
September 1, 2016 $450,000
December 31, 2016 $450,000
March 31, 2017 $450,000
September 30, 2017 $300,000
Dreamworld had $5,000,000 in 12% bonds outstanding
through both years.
Dreamworld's capitalized interest in 2016
was:
a.
$72,000
b.
$63,000
c.
$54,000
d.
$36,000
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2019. Expenditures on the project were as follows:
January 1, 2018
$
300,000
September 1, 2018
$
450,000
December 31, 2018
$
450,000
March 31, 2019
$
450,000
Dreamworld had the following debt obligations outstanding during
both years:
Construction loan,
10%
$500,000
Long-term note,
12% $2,500,000
Required: What would Dreamworld's capitalized
interest be in 2018?
$45,000
$134,000...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new
warehouse. The building was finished and ready for use on September
30, 2019. Expenditures on the project were as follows:
January 1, 2018
$
307,000
September 1, 2018
$
459,000
December 31, 2018
$
459,000
March 31, 2019
$
459,000
September 30, 2019
$
307,000
Dreamworld had $5,300,000 in 13% bonds outstanding through both
years.
The average accumulated expenditures for 2019 by the end of the
construction period was:
On January 1, 2015, Toby Manufacturing Company began construction of a building to be used as...
On January 1, 2015, Toby Manufacturing Company began
construction of a building to be used as its second office. The
building is completed on August 31, 2016. Expenditures on the
project were as follows:
January 3, 2015 $900,000
March 1, 2015 600,000
June 30, 2015 700,000
November 1, 2015 600,000
January 31, 2016 800,000
April 30, 2016 900,000
August 31, 2016 675,000
In order to finance the project, the company obtained a $2
million loan with a 10% interest on...
Q: Arlington Company is constructing a building in 2015. Construction began on January 1 and was...
Q: Arlington Company is constructing a building in 2015.
Construction began on January 1 and was completed on December 31.
Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and
$6,000,000 on December 31. Arlington Company borrowed $2,400,000 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, $4,800,000 note payable and an 11 %, 4-year, $9,000,000
note payable.
6. what is the...
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