Robert Sporting Goods Company constructed a building that qualified for interest capitalization. The construction began at the beginning of the 2020 and was completed at the end of the year. The construction cost totaled $10 200 000 and the weighted average accumulated expenditure associated with the asset was $6 800 000. Robert Sporting Goods Company had outstanding notes payable during the entire year of construction comprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified for the construction of the qualified asset. Required: Complete the following schedules to calculate the following for 2020: i) Actual interest ii) Capitalization rate iii) Avoidable interest
Robert Sporting Goods Company constructed a building that qualified for interest capitalization. The construction began at the beginning of the 2020 and was completed at the end of the year.
The construction cost totaled $10 200 000 and the weighted average accumulated expenditure associated with the asset was $6 800 000.
Robert Sporting Goods Company had outstanding notes payable during the entire year of construction comprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified for the construction of the qualified asset.
Required:
Complete the following schedules to calculate the following for 2020:
i) Actual interest
ii) Capitalization rate
iii) Avoidable interest
iv) Capitalized interest
v) Interest expensed
vi) Capitalized cost of the building
|
|
Principal ($) |
Interest ($) |
|
8% Note Payable |
Answer |
Answer |
|
9% Note Payable |
Answer |
Answer |
|
Total |
Answer |
Answer |
2020:
|
i. Actual interest |
$Answer |
|
ii. Capitalization rate |
Answer% |
|
iii. Avoidable interest |
$Answer |
|
iv. Capitalized interest |
$Answer |
|
v. Interest expensed |
$Answer |
|
vi. Capitalized cost of the building |
$Answer |
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