Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 16E
1.
To determine
Calculate the amount of interest capitalized related to the construction of the building.
2.
To determine
Calculate the weighted average accumulated expenditure and the amount of interest capitalized on the building.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Interest During Construction
Matrix Inc. borrowed $1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019.
Expenditures related to this building were:
January 1 $258,000 (includes cost of purchasing land of $150,000)
May 1
320,000
July 1
450,000
October 31 280,000
In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the entire year.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
Compute the amount of interest capitalized on the building
Interest During Construction
Matrix Inc. borrowed $1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were:
January 1
$258,000
(includes cost of purchasing land of $150,000)
May 1
320,000
July 1
450,000
October 31
275,000
In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the entire year.
Required:
Compute the amount of interest capitalized related to the construction of the building.
$
If the expenditures are assumed to have been incurred evenly throughout the year:Compute weighted average accumulated expenditures
$
Compute the amount of interest capitalized on the building
$
Interest During Construction
Matrix Inc. borrowed $1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and
was completed on October 31, 2019. Expenditures related to this building were:
January 1 $258,000 (includes cost of purchasing land of $150,000)
May 1
310,000
July 1
450,000
October 31 280,000
In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the
entire year.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
24
42,000 x
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
654,000 x
Compute the amount of interest capitalized on the building
52,320 x
Chapter 10 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 10 - Prob. 1GICh. 10 - Prob. 2GICh. 10 - What is the relationship between the book value...Ch. 10 - Prob. 4GICh. 10 - Prob. 5GICh. 10 - Prob. 6GICh. 10 - What are asset retirement obligations? How should...Ch. 10 - Prob. 8GICh. 10 - Prob. 9GICh. 10 - Prob. 10GI
Ch. 10 - At what amount does a company record the cost of a...Ch. 10 - Prob. 12GICh. 10 - Prob. 13GICh. 10 - Prob. 14GICh. 10 - Prob. 15GICh. 10 - Prob. 16GICh. 10 - Prob. 17GICh. 10 - What is the distinction between a capital and an...Ch. 10 - Distinguish between additions and...Ch. 10 - Distinguish between ordinary repairs and...Ch. 10 - Prob. 21GICh. 10 - Hickory Company made a lump-sum purchase of three...Ch. 10 - Prob. 2MCCh. 10 - Electro Corporation bought a new machine and...Ch. 10 - Prob. 4MCCh. 10 - Lyle Inc. purchased certain plant assets under a...Ch. 10 - Ashton Company exchanged a nonmonetary asset with...Ch. 10 - Prob. 7MCCh. 10 - Prob. 8MCCh. 10 - Prob. 9MCCh. 10 - Prob. 10MCCh. 10 - On January 1, Duane Company purchases land at a...Ch. 10 - Prob. 2RECh. 10 - Utica Corporation paid 360,000 to purchase land...Ch. 10 - Prob. 4RECh. 10 - Prob. 5RECh. 10 - Prob. 6RECh. 10 - Nabokov Company exchanges assets with Faulkner...Ch. 10 - Prob. 8RECh. 10 - Dexter Construction Corporation is building a...Ch. 10 - Prob. 10RECh. 10 - Prob. 11RECh. 10 - Ricks Towing Company owns three tow trucks. During...Ch. 10 - Inclusion in Property, Plant, and Equipment...Ch. 10 - Prob. 2ECh. 10 - Acquisition Costs Voiture Company manufactures...Ch. 10 - Determination of Acquisition Cost In January 2019,...Ch. 10 - Asset Retirement Obligation Big Cat Exploration...Ch. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Exchange of Assets Two independent companies,...Ch. 10 - Exchange of Assets Use the same information as in...Ch. 10 - Prob. 11ECh. 10 - Exchange of Assets Goodman Company acquired a...Ch. 10 - Exchange of Assets Use the same information as in...Ch. 10 - Prob. 14ECh. 10 - Self-Construction Harshman Company constructed a...Ch. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Expenditures after Acquisition McClain Company...Ch. 10 - Prob. 21ECh. 10 - Prob. 1PCh. 10 - Classification of Costs Associated with Assets The...Ch. 10 - Prob. 3PCh. 10 - Comprehensive At December 31, 2018, certain...Ch. 10 - Assets Acquired by Exchange Bremer Company made...Ch. 10 - Assets Acquired by Exchange Bussell Company...Ch. 10 - Self-Construction Olson Machine Company...Ch. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Events Subsequent to Acquisition The following...Ch. 10 - Prob. 11PCh. 10 - Prob. 1CCh. 10 - Prob. 2CCh. 10 - Cost Issues Deskin Company purchased a new machine...Ch. 10 - Prob. 4CCh. 10 - Prob. 5CCh. 10 - Prob. 6CCh. 10 - Prob. 7CCh. 10 - Prob. 9CCh. 10 - Prob. 10CCh. 10 - Prob. 11C
Knowledge Booster
Similar questions
- Interest During Construction Matrix Inc. borrowed $1,000,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were: January 1 $252,000 (includes cost of purchasing land of $150,000) May 1 310,000 July 1 420,000 October 31 276,000 In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the entire year. 1. Compute the amount of interest capitalized related to the construction of the building. 2.If the expenditures are assumed to have been incurred evenly throughout the year:a. Compute weighted average accumulated expenditures b. Compute the amount of interest capitalized on the buildingarrow_forwardInterest During Construction Matrix Inc. borrowed $1,000,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were: January 1 $252,000 (includes cost of purchasing land of $150,000) May 1 320,000 July 1 450,000 October 31 275,000 In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the entire year. Required: Compute the amount of interest capitalized related to the construction of the building. $fill in the blank If the expenditures are assumed to have been incurred evenly throughout the year:Compute weighted average accumulated expenditures $fill in the blank Compute the amount of interest capitalized on the building $fill in the blankarrow_forwardOn January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use.The building was completed in 2019. The company borrowed $1,500,000 at 8% on January 1 to help finance theconstruction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018:$5,000,000, 12% bonds$3,000,000, 8% long-term noteConstruction expenditures incurred during 2018 were as follows:January 1 $ 600,000March 31 1,200,000June 30 800,000September 30 600,000December 31 400,000Required:Calculate the amount of interest capitalized for 2018 using the specific interest method.arrow_forward
- On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. 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 2021: B 4 12% bonds Long-term note, 8% Required: Construction expenditures incurred during 2021 were as follows: January 1 March 31 June 30 September 30 December 1 $600,000 $1,200,000 $800,000 $600.000 $300,000 Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place.) Expenditure Average Date January 1 March 31 June 30 September 30 December 1 Avg. accumulated expenditures 5,000,000 3,000,000 Average accumulated expenditures X X X X X Amount Weight X X IIII|| Interest Rate P Capitalized Interestarrow_forwardSulo Company had the following borrowings during 2021. The borrowing were made for general purposes but the proceeds were used to finance the construction of new building. 12% bank loan – Principal – 3,000,000; Interest – 360,000 14% long term loan – Principal -5,000,000; Interest – 700,000 The construction began on January 1, 2021 and was completed on December 31, 2021. Expenditures on the building were 2,000,000 on January 1, 2,000,000 on June 30 and 1,000,000 in December 31. Required: Compute the cost of the building.arrow_forwardThornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. 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, 8% note $5,000,000, 4% bonds Construction expenditures incurred were as follows: July 1, 2018 September 30, 2018 November 30, 2018 January 30, 2019 $ 660,000 930,000 930,000 870,000 The company's fiscal year-end is December 31. Required: Calculate the amount of interest capitalized for 2018 and 2019.arrow_forward
- Klutlan Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Klutlan does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $2,000,000, 8% note $8,000,000, 5% bonds Construction expenditures incurred were as follows: July 1, 2018 $520,000 September 30, 2018 600,000 November 30, 2018 600,000 January 30, 2019 540,000 The company's fiscal year-end is December 31. Question The total value of the warehouse at the end of construction would be: a $2,288,000 b $2,317,702 c $1,745,760 d $2,260,000arrow_forwardYONEX Company constructed an asset for its own use. Construction started on January 1, 2019 and the asset was completed on December 31,2019. Expenditures of construction cost of $1,560,000 were evenly incurred during the construction period, and the company has the following outstanding obligations prior to the start of the construction: Specific borrowing $700,000, 16%, due December 31,2020 General borrowing $300,000, 12% due December 31,2019 General borrowing $200,000, 12% due December 31,2019 What is the total cost of the self constructed asset?arrow_forwardInnuendo Company had the following loans outstanding for the entire year 2021. Specific construction loan – 2,000,000 – 10% General loan – 10,000,000 – 12% The entity began the self-construction of building on January 1, 2021 and the building was completed on December 31, 2021. The following expenditures were made during the current year: January 1 - 1,000,000 July 1 - 4,000,000 November 1 - 3,000,000 Total - 8,000,000 Required: Compute the cost of the new building.arrow_forward
- GUY Company constructed an asset for its own use. Construction started on January 1, 2019 and the asset was completed on December 31,2019. Expenditures of construction cost of $1,560,000 were evenly incurred during the construction period, and the company has the following outstanding obligations prior to the start of the construction: Specific borrowing$700,000, 16%, due December 31,2020 General borrowing$300,000, 12% due December 31,2019 General borrowing $200,000, 12% due December 31,2019 What is the amount that will be presented as interest expense for the year 2019?arrow_forwardChange Entity had the following borrowing on January 1 of the current year. The borrowings were made for general purposes and the proceeds were partly used to finance the construction of a new building.10% bank loan, 2,800,000 - 280,000 annual interest10% short-term note, 1,600,000 - 160,000 annual interest12% long-term loan, 2,000,000 - 240,000 annual interestThe construction of the building was started on January 1 and was completed on December 31 of the current year. Expenditures on the building were made as follows: January 1 - 400,000; March 31 - 1,000,000; June 30 - 1,200,000; September 30 - 1,000,000; December 31 - 400,000. (Round off the capitalization rate to 3-decimal). What is the average expenditure?arrow_forwardThornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31,2019. No new loans were required to fund construction. Thornton does have the following two interest-bearingliabilities that were outstanding throughout the construction period:$2,000,000, 8% note$8,000,000, 4% bondsConstruction expenditures incurred were as follows:July 1, 2018 $400,000September 30, 2018 600,000November 30, 2018 600,000January 30, 2019 540,000The company’s fiscal year-end is December 31.Required:Calculate the amount of interest capitalized for 2018 and 2019.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning