Question

On March 1, Nielson LLC. began construction of a small building. The following expenditures were incurred for construction:

March 1 $ 225,000

April 1 540,000

May 1 300,000

June 1 $ 222,000

July 1 810,000

The building was completed and occupied on July 1. To help pay for construction $150,000 was borrowed on March 1 on a 12%, three-year note payable. The only other debt outstanding
during the year was a $1,500,000, 10% note issued two years ago.

Instructions (SHOW WORK)
(a) Calculate the weighted-average accumulated expenditures.
(b) Calculate avoidable interest.
(c) Calculate actual interest.
(d) Record the journal entry for interest capitalization on July 1.

Answer 1

Solution:

(a) Calculate the weighted-average accumulated expenditures.

Date	Expenditure	Period	weighted-average accumulated expenditures
Mar 1	225,000	4/12	75,000
Apr 1	540,000	3/12	135,000
May 1	300,000	2/12	50,000
Jun 1	222,000	1/12	18,500
July 1	810,000	0/12	0
Weighted-average accumulated expenditures			278,500

(b) Calculate avoidable interest.

weighted-average accumulated expenditures	Rate	Avoidable interest
150,000	12%	18,000
128,500	10%	12,850
278,500	Avoidable interest	30,850

Note:

As per HOMEWORKLIB RULES i am answered only two questions. If you need remaining also please send as another. Hope you understand.

Thank you.