On March 1, 2010, Packard Company purchased land for an office site by paying $600,000 cash....

3.8 Ratings (424 Votes)

Calculation of Average Accumulated Expenditures:-
Date	Expenditure		Weight		Average
March 1, 2011	$ 680,000	×	4/12	=	$226,667
April 1, 2011	$ 352,000	×	3/12	=	$88,000
May 1, 2011	$ 450,000	×	2/12	=	$75,000
June 1, 2011	$ 520,000	×	1/12	=	$43,333
Accumulated Expenditure	$ 2,002,000				$433,000

Calculation of Weighted average interest rate on debts for capiatlization purpose
	Amount of loan		Interest rate		Interest
	a		b		*ab**
11%, 6-year note payable	$ 150,000		11%		$ 16,500
13%, 10-year note payable	$ 300,000		13%		$ 39,000
Total	$ 450,000				$ 55,500

Weighted average interest rate on debts for capiatlization purpose	=		$55,500	×	100
	=		$450,000	×	100
	=		12.33%

Calculation of The amount of interest cost to be capitalized by Packard during 2011:-
	Average		Interest rate		Capitalized Interest
Average Accumulated expenditures	$ 433,000
Common Stock	$ 400,000
Other Debts (433000-400000)	$ 33,000	×	12.33%	=	$ 4,070
Total					$ 4,070

Feel free to ask any clarification, if required. Please provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you.

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Other questions asked by students