Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 11, Problem 11.9E
a.
To determine
The weighted average accumulated expenditure for current year.
Given Information:
Amount of note payable is $2,800,000 with the interest of 5% and time period of 3 years.
Amount of 6% bond payable is $5,000,000.
Amount of 9% note payable is $1,000,000.
Additional payments in second year amounted to $900,000 and $1,800,000.
Line of credit opted to finance operating cycle amounted to $2,400,000.
b.
To determine
To determine: To determine: The amount of avoidable interest and actual interest.
Given Information:
Amount of note payable is $2,800,000 with the interest of 5% and time period of 3 years.
Amount of 6% bond payable is $5,000,000.
Amount of 9% note payable is $1,000,000.
Additional payments in second year amounted to $900,000 and $1,800,000.
Line of credit opted to finance operating cycle amounted to $2,400,000.
c.
To determine
The amount of interest to be capitalized and expensed during the year.
d.
To determine
To prepare: The
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On January 3, 2020, Mercury Company began self-constructing an asset that qualified for interest capitalization. On January 5, Mercury borrowed $300,000 on an 8% construction loan. In addition, Mercury had $400,000 of 6% notes payable and $600,000 of 9% bonds payable outstanding. By December 31, expenditures (occurring evenly throughout the year) of $900,000 had been made on the asset. Investment of unused funds during the year yielded $1,200 of interest revenue.Required:Compute the amount of interest that should be capitalized during 2020.
During 2021, Happy Company constructed asset costing P10,000,000. The weighted average expenditures totaled P6,000,000.
To help pay for the construction, P4,400,000 was borrowed at 10% on January 1, 2021.
Funds not needed for construction were temporarily invested in short-term securities yielding P90,000 in interest revenue.
Other than the construction funds borrowed, the only other debt outstanding during the year was P5,000,000, 10-year, 9% note payable dated January 1, 2020.
What amount of interest should be capitalized during 2021?
Case D
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…
Chapter 11 Solutions
Intermediate Accounting (2nd Edition)
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