Question

In: Accounting

Ayayai Company is constructing a building. Construction began on February 1 and was completed on December...

Ayayai Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,160,000 on March 1, $1,440,000 on June 1, and $3,600,000 on December 31.

Ayayai Company borrowed $1,200,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 5-year, $2,400,000 note payable and an 11%, 4-year, $4,200,000 note payable. Compute avoidable interest for Ayayai Company. Use the weighted-average interest rate for interest capitalization purposes. (Round "Weighted-average interest rate" to 4 decimal places, e.g. 0.2152 and final answer to 0 decimal places, e.g. 5,275.)

Avoidable interest

$   

Solutions

Expert Solution

If it is helpful, please rate the answer and if any doubt arises let me know

Avoidable Interest $                 286,691
Workings:
Expenditure for the year
Mar-01 $              21,60,000 X 10 / 12 = $ 18,00,000
Jun-01 $              14,40,000 X 7 / 12 = $   8,40,000
Dec-31 $              36,00,000 X 0 / 12 = $                -  
$              72,00,000 $ 26,40,000
Interest Capitalised
$                                     26,40,000
Less: $                                     12,00,000 X 12.00% = $   1,44,000
Balance $                                     14,40,000 X 9.91% = $   1,42,691
Interest Capitalised = $   2,86,691
Weighted Average rate of all debt:-
$              24,00,000 X 8% = $   1,92,000
$              42,00,000 X 11% = $   4,62,000
$              66,00,000 $   6,54,000
Weighted Average rate of all debt = 9.9091%
($ 654000 / $ 6600000)

Related Solutions

Novak Company is constructing a building. Construction began on February 1 and was completed on December...
Novak Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,072,650 on December 31. Compute Novak’s weighted-average accumulated expenditures for interest capitalization purposes. Weighted-Average Accumulated Expenditures = $
Skysong Company is constructing a building. Construction began on February 1 and was completed on December...
Skysong Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $3,240,000 on March 1, $2,160,000 on June 1, and $5,400,000 on December 31. Skysong Company borrowed $1,800,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $3,600,000 note payable and an 11%, 4-year, $6,300,000 note payable. Compute avoidable interest for Skysong Company. Use the...
Bramble Company is constructing a building. Construction began on February 1 and was completed on December...
Bramble Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $3,600,000 on March 1, $2,400,000 on June 1, and $6,000,000 on December 31. Bramble Company borrowed $2,000,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 5-year, $4,000,000 note payable and an 11%, 4-year, $7,000,000 note payable. Compute avoidable interest for Bramble Company. Use the...
Larkspur Company is constructing a building. Construction began on February 1 and was completed on December...
Larkspur Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,920,000 on March 1, $1,200,000 on June 1, and $3,070,300 on December 31. Larkspur Company borrowed $1,041,900 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,227,300 note payable and an 11%, 4-year, $3,799,000 note payable. Compute avoidable interest for Larkspur Company. Use the...
Riverbed Company is constructing a building. Construction began on February 1 and was completed on December...
Riverbed Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $5,040,000 on March 1, $3,360,000 on June 1, and $8,400,000 on December 31. Riverbed Company borrowed $2,800,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 5-year, $5,600,000 note payable and an 11%, 4-year, $9,800,000 note payable. Compute avoidable interest for Riverbed Company. Use the...
Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December...
Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,812,000 on March 1, $1,212,000 on June 1, and $3,007,840 on December 31. Wildhorse Company borrowed $1,004,930 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,200,900 note payable and an 11%, 4-year, $3,365,100 note payable. Compute the weighted-average interest rate used for interest...
Pharoah Company is constructing a building. Construction began on February 1 and was completed on December...
Pharoah Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,824,000 on March 1, $1,224,000 on June 1, and $3,030,540 on December 31. Pharoah Company borrowed $1,082,950 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,046,800 note payable and an 10%, 4-year, $3,555,500 note payable. Compute the weighted-average interest rate used for interest...
Sheridan Company is constructing a building. Construction began on February 1 and was completed on December...
Sheridan Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,004,000 on March 1, $1,284,000 on June 1, and $3,039,450 on December 31. Compute Sheridan’s weighted-average accumulated expenditures for interest capitalization purposes.
Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December...
Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,032,200 on December 31. Wildhorse Company borrowed $1,016,400 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,206,100 note payable and an 10%, 4-year, $3,702,000 note payable. Compute avoidable interest for Wildhorse Company. Use the...
Pina Company is constructing a building. Construction began on February 1 and was completed on December...
Pina Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,004,000 on March 1, $1,284,000 on June 1, and $3,039,450 on December 31. Compute Pina’s weighted-average accumulated expenditures for interest capitalization purposes.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT