a. Explanation Capitalization of Interest: The interest which is paid o the funds used for the purpose of construction of the long term asset. It indicates the increment in the value of asset over the period of time Calculation of the interest to be capitalized: Formula to calculate the amount of the interest to be capitalized is: Interest amount = Avoidable interset + Actual interest Substitute $177,500 for the amount of avoidable interest and $505,000 for the actual interest, Interest amount = $ 177 , 500 + $ 505 , 000 = $ 682 , 500 Calculation of the amount of the actual interest: Table (1) The amount of the actual interest is $685,000. Working Note: Calculation of the amount of the average accumulated expenditure for 2018: Table (2) Calculate the amount of avoidable interest: Amount of interest = Weighted expenditure × Interest rate = $ 1 , 775 , 000 × 10 % = $ 177 , 500 Calculate the amount of weighted average accumulated expenditure 2019: b. To determine To prepare: The required journal entries. c. To determine The Final valuation of the power plant

Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)

2nd Edition

ISBN: 9780134833118

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Question

Chapter 11, Problem 11.2P

To determine

The amount of the interest to be capitalized.

To determine

To prepare: The required journal entries.

To determine

The Final valuation of the power plant

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Chapter 11, Problem 11.1P

Chapter 11, Problem 11.3P

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Chapter 11 Solutions

Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)

Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

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