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Early in 2012, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization...

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Accounting

Early in 2012, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2012 and was completed on December 31, 2012. Dobbs made the following payments to Kiner, Inc. during 2012:

Date Payment

June 1, 2012 $4,800,000

August 31, 2012 7,200,000

December 31, 2012 6,000,000

In order to help finance the construction, Dobbs issued $4,000,000 of 10-year, 9% bonds payable, issued at par on May 31, 2012, with interest payable annually on May 31.

In addition to the 9% bonds payable, the only debt outstanding during 2012 was a $1,200,000, 12% note payable dated January 1, 2008 and due January 1, 2018, with interest payable annually on January 1.

Instructions

Compute the amounts of each of the following (show computations):

1. Weighted-average accumulated expenditures qualifying for capitalization of Interest cost _________________

2. Avoidable interest incurred during 2012. _______________

3. Total amount of interest cost to be capitalized during 2012. _______________

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