Question
In: Accounting
On April 1, Paine Co. began construction of a small building. Payments of $180,000 were made...
On April 1, Paine Co. began construction of a small building. Payments of $180,000 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
Question 2
On March 1, Mocl Co. began construction of a small building. The following expenditures were incurred for construction:
March 1 $ 150,000 April 1 $ 148,000
May 1 360,000 June 1 540,000
July 1 200,000
The building was NOT completed and occupied on July 1. To help pay for construction $100,000 was borrowed on March 1 on a 12%, three-year note payable. The only other debt outstanding during the year was a $1,000,000, 10% note issued two years ago.
Instructions
(a) Calculate the weighted-average accumulated expenditures.
(b) Calculate avoidable interest.
Solutions
Expert Solution
Answer 1:
| Interest Capitalization is between the months of April and August |
| The first expenditure on April is outstanding for 3 months. |
| Therefore the weight for the April 1st payment will be 3/12 |
| This trend will continue for the remaining months |
|
Answer 2:
|
a) Weighted Average accumulated expenditures
|
b)
| Avoidable interest rate is calculated in two parts | ||||||||||||
|
The amount of 100,000 for which a specific borrowing has been incurred, plus the remaining amount of 92,000
|
ekkarill92 answered 1 year agoRelated Solutions
On April 1, Paine Co. began construction of a small building. Payments of $234,960 were made...
On April 1, Paine Co. began construction of a small building.
Payments of $234,960 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
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