Question 1 On March 1, ABC Co. began construction of a small building. The following...
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Accounting
Question 1
On March 1, ABC Co. began construction of a small building. The following expenditures were incurred for construction:
Date Expenditures
3/1/2022 $ 300,000 4/1/2022 400,000 5/1/2022 620,000 6/1/2022 1,020,000 7/31/2022 310,000
The building was completed and occupied on August 1. To help pay for construction $400,000 was borrowed on March 1 on a 12% three-year note payable. The only other debt outstanding during the year was a $200,000, 10% note issued two years ago.
(a). Calculate the weighted-average accumulated expenditures.
(Hint: using the following four-column schedule to calculate)
| Date | Expenditures | Capitalization Period | Weighted-Average Accumulated Expenditures |
(b). Calculate the avoidable interest.
(c). Calculate the actual interest.
(d). Journal entry to capitalize interest.
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