1-c Bonita Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Bonita since 2020. Bonita s original facility became obsolete by early 2025 because of the increased sales volume and the fact that Bonita now carries, DVDs in addition to books. On June 1, 2025, Bonita contracted with Black Construction to have a new building constructed for $4,720,000 on land owned by Bonita. The payments made by Bonita to Black Construction are shown in the schedule below. Date 30-jul-25. 30-jan-26. 30-may-26. Total payment Amount $1,062,000 1,770,00 1,888,000 $4.720,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Bonita had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2026 the end of its fiscal year. 10%, 5-year note payable of $2,360,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,540,000 sold at par on June 30, 2018, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material question A: Compute the weighted-average accumulated expenditures on Bonita" s new building during the capitalization period. Weighted-average accumulated expenditures: question B: Compute the avoidable interest on Bonita s new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to 0 decimal places, e.g. 5,125.) Avoidable interest. $ 165200 1: C Some interest cost of Bonita Inc. is capitalized for the year ended May 31, 2026. Compute the amount of each of the items that must be disclosed in Bonita' s financial statements. Total actual interest cost 1475000 Total interest capitalized Total interest expensed Senter a dollar amount Senter a dollar amount Senter a dollar amount
1-c Bonita Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Bonita since 2020. Bonita s original facility became obsolete by early 2025 because of the increased sales volume and the fact that Bonita now carries, DVDs in addition to books. On June 1, 2025, Bonita contracted with Black Construction to have a new building constructed for $4,720,000 on land owned by Bonita. The payments made by Bonita to Black Construction are shown in the schedule below. Date 30-jul-25. 30-jan-26. 30-may-26. Total payment Amount $1,062,000 1,770,00 1,888,000 $4.720,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Bonita had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2026 the end of its fiscal year. 10%, 5-year note payable of $2,360,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,540,000 sold at par on June 30, 2018, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material question A: Compute the weighted-average accumulated expenditures on Bonita" s new building during the capitalization period. Weighted-average accumulated expenditures: question B: Compute the avoidable interest on Bonita s new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to 0 decimal places, e.g. 5,125.) Avoidable interest. $ 165200 1: C Some interest cost of Bonita Inc. is capitalized for the year ended May 31, 2026. Compute the amount of each of the items that must be disclosed in Bonita' s financial statements. Total actual interest cost 1475000 Total interest capitalized Total interest expensed Senter a dollar amount Senter a dollar amount Senter a dollar amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Step 1: Introduction of capitalized interest
VIEWStep 2: Requirement A - Computation of the weighted average accumulated expenditure
VIEWStep 3: Requirement B - Computation of avoidable interest
VIEWStep 4: Requirement C - Computation of the amount of each item disclosed in the financial statements
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