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Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 1P

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Instructions:

Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

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On December 31, 2009, Hurston Inc. borrowed $4,000,000 at 10% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $250,000; June 1, $500,000; July 1, $1,600,000; December 1, $1,100,000. Additional information is provided as follows. Other debt outstanding 10-year, 11.5 % bond, December 31, 2003, interest payable annually 6-year, 12.5 % note, dated December 31, 2007, interest payable annually March 1, 2010, expenditure included land costs of $150,000 Interest revenue earned in 2010 on funds related to specific borrowing $49,000 Instructions Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.
On December 31, 2016, Headland Inc. borrowed $840,000 at 12% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: June 1, $336,000; July 1, $504,000; September 1, $1,008,000; December 1, $504,000. The building was completed in April 2018. Additional information is provided as follows. 1. Other debt outstanding 10-year, 10% bond, dated December 31, 2010, interest payable annually $8,400,000 15-year, 12% note, dated December 31, 2004, interest payable annually $2,100,000 2. Interest revenue earned in 2017 $5,040 Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2017
On December 21, 2013, Jumble Inc. borrowed $1,000,000 at 10% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures realated to this building. Jun-1 $400,000 July-1 $600,000 Sep-1 $1,200,000 Dec-1 $600,000 The building was completed in April 2015. Additional information is provided as follows: 1) other debt outstanding: 10-year, 8% bond dated December 31,2012, interest payable annually $10,000,000 15-year, 10% note, dated December 31, 2012, interest payable annually $2,500,000 2) Interest revenue earned in 2014 $6,000 INSTRUCTIONS: A) Determine the amount of interest to be capitalized in 2014 in relation to the construction of the building B) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014
On December 31, 2016, Marin Inc. borrowed $3,720,000 at 13% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $446,400; June 1, $744,000; July 1, $1,860,000; December 1, $1,860,000. The building was completed in February 2018. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2010, interest payable annually $4,960,0006-year, 11% note, dated December 31, 2014, interest payable annually $1,984,0002. March 1, 2017, expenditure included land costs of $186,000 3. Interest revenue earned in 2017 $60,760 Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building. The amount of interest
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On December 31, 2019, Main Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,500,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10.year, 13% bond, December 31, 2013, interest payable annually $4,000,000 6-year, 10% note, dated December 31, 2017, interest payable annually $1,600,000 2. March 1, 2020, expenditure included land costs of $150,000 3. Interest revenue earned in 2020 $49,000 Instructions a. Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building. b. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020.
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As during eighth year, Clark Company spent $2,400,000 on equipment for its own use. The project took a whole year to complete, and all expenditures were spread out evenly over the year. Clark was able to borrow $1,500,000 at 6% interest at the start of the term for the procurement of materials and the fabrication of the equipment. On December 31, year 8, the whole debt, including interest, was redeemed and replaced with a long-term loan. Clark Company has an extra debt of $1,000,000 in year 8, with a weighted average interest rate of 7%. What will Clark Corporation report as interest cost in year 8 if it capitalises the maximum amount of interest allowed under GAAP?