INTERMEDIATE ACCOUNTING ACCESS
9th Edition
ISBN: 9781260790177
Author: SPICELAND
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 10, Problem 10.22E
To determine
Interest Capitalization:
Interest capitalization refers to the interest amount that is added to the cost of the long-term asset. Such interest capitalization amount includes the interest amount of the debt which was financed for acquiring the asset.
To Calculate: The amount of interest capitalized in 2018 for the building, using the specific interest method.
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Question 1
Patrick Industries began construction of a warehouse on July 1, 2023. The project was completed
on May 31, 2024. Patrick took out a $1,000,000 note at interest of 6% to help finance the
construction. Patrick also has the following other debt outstanding throughout the construction
period:
$2,000,000, 8% note
$5,000,000,4% bond
Construction expenditures incurred were as follows:
July 1, 2023
September 30, 2023
November 30, 2023
$300,000
700,000
500,000
February 1, 2024
200,000
May 31, 2024
200,000
The company's fiscal year-end is December 31 and it uses the specific interest method.
Required
a. Calculate the amount of interest capitalized for 2023 and 2024.
b. Calculate the interest expense to be reported on the income statement for 2023 and 2024.
c. Calculate the cost of the new warehouse.
Required:
Calculate the amount of interest capitalized for 2024.
E 10-24 Interest capitalization LO10-7
On January 1, 2024, the Highlands Company began construction on a new manufacturing facility for its own use. The building was
completed in 2025. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the
construction loan, Highlands had the following debt outstanding throughout 2024:
$5,000,000,
$3,000,000,
Construction expenditures incurred during 2024 were as follows:
January 1
March 31
June 30
12% bonds
8% long-term note
September 30
December 31
$ 600,000
1,200,000
800,000
600,000
400,000
Required:
Calculate the amount of interest capitalized for 2024 using the specific interest method.
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Thomton Industries began construction of a warehouse on July 1, 2021, The project was completed on March 31, 2022. No new loans
were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout
the construction period:
$3,000, 000, 10% note
$7,000, 000, 6% bonds
Construction expenditures incurred were as follows:
July 1, 2021
September 3e, 2021
November 30, 2021
January 30, 2022
$ 460, 000
660, 000
660, 000
600, 000
Hint
The company's fiscal year-end is December 31.
Required:
Calculate the amount of interest capitalized for 2021 and 2022.
terences
Complete this question by entering your answers in the tabs below.
2021
2022
Calculate the amount of interest capitalized for 2021. (Do not round the intermediate calculations. Round your percentage answers to 1
decimal place (i.e. 0.123 should be entered as 12.3%).)
Date
Expenditure
Weight
Average
July 1, 2021
%24…
Chapter 10 Solutions
INTERMEDIATE ACCOUNTING ACCESS
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Acquisition cost; noninterest-bearing note LO103...Ch. 10 - Prob. 10.8BECh. 10 - Fixed-asset turnover ratio LO105 Huebert...Ch. 10 - Fixed-asset turnover ratio; solve for unknown ...Ch. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.17BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.19BECh. 10 - Acquisition costs; land and building LO101 On...Ch. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Intangibles LO101 In 2018, Bratten Fitness...Ch. 10 - Goodwill LO101 On March 31, 2018, Wolfson...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.12ECh. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.22ECh. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization; multiple periods LO107...Ch. 10 - Research and development LO108 In 2018, Space...Ch. 10 - Prob. 10.27ECh. 10 - IFRS; research and development LO108, LO109...Ch. 10 - IFRS; research and development LO109 IFRS NXS...Ch. 10 - Prob. 10.30ECh. 10 - Software development costs LO108 Early in 2018,...Ch. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.34ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Nonmonetary exchange LO106 On September 3, 2018,...Ch. 10 - Prob. 10.8PCh. 10 - Interest capitalization; specific interest method ...Ch. 10 - Prob. 10.10PCh. 10 - Research and development LO108 In 2018,...Ch. 10 - Prob. 10.12PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Research Case 102 FASB codification; locate and...Ch. 10 - Judgment Case 103 Self-constructed assets LO107...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6BYPCh. 10 - Prob. 10.7BYPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9BYPCh. 10 - Prob. 10.11BYPCh. 10 - Ethics Case 1012 Research and development LO108...Ch. 10 - Prob. 10.13BYPCh. 10 - Prob. 10.14BYPCh. 10 - Prob. 10.15BYPCh. 10 - Prob. 10.16BYPCh. 10 - Continuing Cases Target Case LO101, LO105 Target...
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