Question

Can someone show me how to solve this problem?

Question 8 On July 31, 2017, Blue Company engaged Minsk Tooling Company to construct a special purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Blue issued a $296,400, 3- year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $194,400 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, Blue made a final $102,000 payment to Minsk. Other than the note to Netherlands, Blue's only outstanding liability at December 31, 2017, is a $28, 100, 890, 6-year note payable, dated January 1, 2014, 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 2017. Interest revenue Weighted-average accumulated expenditures Avoidable interest Interest capitalized

Answer 1

Interest revenue	$2550
Weighted average accumulated expenditure	$48600
Avoidable interest	$5832
Interest capitalized	$5832

Explanation:

Interest revenue = $102000 × 10% × 3/12 = $2550

Date	expenditure (a)	capitalization period (b)	weight (c = b/12)	weighted expenditure (a×c)
July 31	$194400	3	0.25	$48600
Nov. 01	$102000	0	0	0
	$296400			$48600

Avoidable interest = $48600 × 12% = $5832

Interest capitalized = $5832

.

.

PLEASE DO GIVE A THUMBS UP