Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: ⚫ Capitalization period: January 1, Year 1, to June 30, Year 2 . • Expenditures on project: Year 1: January 1 $ 624,000 May 1 October 1 441,000 516,000 Year 2: March 1 June 30 1,476,000 660,000 • Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $6 million borrowed on January 1, Year 1, at 12% $10 million borrowed on January 1, Year 1, at 6% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, Year 1 Capitalized interest, Year 2 2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in Year 2.

Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: ⚫ Capitalization period: January 1, Year 1, to June 30, Year 2 . • Expenditures on project: Year 1: January 1 $ 624,000 May 1 October 1 441,000 516,000 Year 2: March 1 June 30 1,476,000 660,000 • Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $6 million borrowed on January 1, Year 1, at 12% $10 million borrowed on January 1, Year 1, at 6% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, Year 1 Capitalized interest, Year 2 2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in Year 2.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 18E

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4. The following information pertains to Our Company's self-constructed building project Our Company is building a project for its own use. We have been asked to calculate the amount of interest to be capitalized. 2021 Payments: 1/31/21 2/28/21 Specific construction debt: $900,000, 4%, 5-year note, dated 12/31/20, interest paid annually on 12/31 415,000 500,000 6/1/21 860,000 12/1/21 725,000 Other debt: 2,500,000 $825,000, 5%, annual interest paid 12/31, dated 12/31/20 $1,250,000, 7%, 10 year bonds, dated 12/31/17, interest paid 12/31 How much is the weighted average of the accumulated expenditures? b. How much is the weighted average of the interest rates on other debt? c. How much is the avoidable interest? d. How much is the actual interest? e. How much is recorded as the interest expense? f. How much interest should be capitalized? a.
nterest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 $ 492,000 May 1 441,000 October 1 648,000 2020: March 1 1,392,000 June 30 708,000 Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $5 million borrowed on July 1, 2018, at 12% $12 million borrowed on January 1, 2017, at 6% Required: Note: Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ fill in the blank 1 Capitalized interest, 2020 $ fill in the blank 2 If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. $ fill in the blank 3 Since…
Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: • Capitalization period: January 1, 2019, to June 30, 2020 • Expenditures on project: 2019: 2020: January 1 May 1 October 1 $ 540,000 537,000 600,000 March 1 June 30 Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $7 million borrowed on July 1, 2018, at 12% $16 million borrowed on January 1, 2017, at 6% Required: 1,404,000 504,000 Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ Capitalized interest, 2020 2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. $ 3. Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report will report income than…
Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 May 1 $420,000 381,000 October 1 552,000 2020: March 1 June 30 Amounts borrowed and outstanding: 1,428,000 624,000 $1.6 million borrowed at 12%, specifically for the project $4 million borrowed on July 1, 2018, at 14% $18 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ 933,000 X Capitalized interest, 2020 $ 2,052,000 X 2. If it is assumed that the production complex has an animated life of years and a residual value of $0, compute the straight-line depreciation in 2020. Alpha-numeric input field 115,825 X $ 3. Since GAAP requires accrual accounting, if a company capitalizes…
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On January 1, 2018, the Divine Company took out a 12% P10 million loan to finance the construction of a building. The key dates are as follows: January 1 – Loan interest relating to the project starts to be incurredFebruary 1 – Technical site planning commencesMarch 1 – Expenditures on the project start to be incurredApril 1– Construction Work CommencesNovember 1 – Substantially all of the activities necessary to prepare the asset for its intended use are completeDecember 1 – Building brought into use What amount of interest should divine capitalize for the current year?a. 1,000,000b. 900,000c. 800,000d. 700,000 What is the solution for option C?
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(D) ABC Corporation funded the construction of its new plant through both specific and general borrowing. Details are as follows: Amount Spent Date P 4,800,000 6,000,000 Jan. 1, 2021 Oct. 30, 2021 Borrowing Interest Rate Principal Amt. P 5,000,000 10,000,000 Investment Income P 100,000 50,000 Specific 7% General 10% 10. How much is the average carrying value of the equipment during the year? 11. How much is the capitalizable borrowing cost for the year? 12. How much is the interest expense to be reported in the income statement for the year?
Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 $ 624,000 May 1 501,000 October 1 612,000 2020: March 1 1,596,000 June 30 660,000 Amounts borrowed and outstanding: $1.5 million borrowed at 12%, specifically for the project $8 million borrowed on July 1, 2018, at 14% $14 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 Capitalized interest, 2020 If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. __________ Since GAAP requires accrual…
Use the following information for the next two questions: On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset: Principal P1,000,000 12% bank loan (1.5 years) 10% bank loan (3-year) P8,000,000 Expenditures made on the qualifying asset were as follows: Jan.1 P 5,000,000 4,000,000 March 1 August 31 December 1 3,000,000 2,000,000 Construction was completed on December 31, 20x1. .How much borrowing costs are capitalized to the cost of the constructed qualifying asset?