Question

On July 31, 2020, Whispering Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction begun immediately and was completed on November 1, 2020. To help finance construction, on July 31 Whispering issued a $320,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $211,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Whispering made a final $109,000 payment to Minsk. Other than the note to Netherlands, Whispering's only outstanding liability at December 31, 2020, is a $31,100,8%, 6-year note payable, dated January 1, 2017, on which interest is payable each December 31. Calculate the interest revenue, weighted average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2020. Interest revenue Weighted average accumulated expenditures Avoidable interest Interest capitalized Prepare the journal entries needed on the books of Whispering Company at each of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) (1) July 31, 2020. (2) November 1, 2020. (3) December 31, 2020. Date bate Account Titles and Explanation Debit Credit (To record the note.) (To record the payment to Minsk.) (To record the payment to Minsk.) 12/31

Answer 1

Answer:

Computation of Weighted-Average Accumulated Expenditures
Date	Amount($)	Capitalization	Weighted-Average
		Period	Accumulated Expenditures
Jul-31	2,11,400	. 3/12	52,850
Nov-01	1,09,000	-	-

Weighted-average accumulated expenditures= 52,850
Interest revenue	109000*.10*3/12	2725
Weighted-Average	Interest Rate	Avoidable Interest
Accumulated Expenditures
52,850	12%	6,342
Interest capitalized	6,342

Journal Entries:
Date	Accounts	Debit($)	Credit($)
Jul-31	Cash	3,20,400
	Note Payable		3,20,400
Jul-31	Machinery	2,11,400
	Short term Investment	1,09,000
	Cash		3,20,400
Nov-01	Cash	1,11,725
	Interest Revenue		2,725
	Short term Investment		1,09,000
Nov-01	Machinery	1,09,000
	Cash		1,09,000
Dec-31	Machinery (From working)	6,342
	Interest Expense	12,326
	Cash ($33100*8%)		2,648
	Interest Payable ($320,400*12%*5/12)		16,020