Question
In: Finance
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 from 2018 does not compound in 2019)?
Solutions
Expert Solution
| Date | Amount incurred | No. of months | Weighted average amount |
| a | b | c=a × b/12 | |
| Beg. | 1,200,000 | 12 | 1,200,000 |
| Mar. 31 | 450,000 | 8 | 300,000 |
| Accumulated expenditure | 1,500,000 |
| Avoidable interest | ||||
| Particulars | Amount used for contruction | Rate of interest | Interest | |
| Contruction loan | 500,000 | 10.0000% | 50,000.00 | |
| General debt | 1,000,000 | 12.0000% | 120,000.00 | |
| Avoidable interest | 170,000.00 |
Capitalized interest is 170,000
jeff jeffy answered 1 year agoRelated Solutions
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, 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, 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, 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, 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...
On January 1, 2018, Star Inc. began construction of a new warehouse for its own use....
On January 1, 2018, Star Inc. began construction of a new
warehouse for its own use. The warehouse was completed in 2019.
Expenditures on the project in 2018 were as follows:
January
1,
2018 $310,000
March
31,
2018 $600,000
September
1, 2018 $720,000
Star borrowed $600,000 on a
construction loan at 6% interest rate on January 1, 2018. The loan
was outstanding throughout the construction period. During 2018,
the company had $300,000 in 4% bonds and $700,000 in 8% notes
outstanding. Star’s capitalized...
On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used...
On January 1, 2018, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2019.
Expenditures on the project were as follows:
January 1, 2018
$
2,020,000
March 1, 2018
1,740,000
June 30, 2018
1,940,000
October 1, 2018
1,740,000
January 31, 2019
441,000
April 30, 2019
774,000
August 31, 2019
1,071,000
On January 1, 2018, the company obtained a $4,900,000 construction
loan with a 12% interest rate....
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