Question

On July 31, 2017, Amsterdam Company engaged Minsk Tooling Company to construct a special- purpose piece of factory machinery. Construction was begun immediately and was completed on November 30, 2017. To help finance construction, on July 31 Amsterdam issued a $80,000, 3 year, 11% notes payable, on which interest is payable each July 31. In addition, the company had outstanding all year a 8%, 3-year, $100,000 note payable and an 10%, 4-year, $150,000 note payable. Interests on both 8% and 10% note payables are payable each December 31. Amsterdam made payments to Minsk of $240,000 on July 31 and $120,000 on October 1. Calculate weighted-average accumulated expenditures avoidable interest, and total interest cost to be capitalized during 2017. b. Prepare the journal entries needed on the books of Amsterdam Company at each of the following dates (July 31, October 1, and December 31). a.

Answer 1

USA PAGE AND 241047720 20 Computation bulahin of sergate I Avvoye Aconilacked Bylo Date Anak Capitalista period Weighted Average Acumlard Eperdita Jul 31 240,000 120,000 2/12 Total Weighted Abiage acumulated expendikeren = $ 109007 80,000 [140,000 y u2] 20,000 [120,00y 2/12] $ 100 000 Avoidable Talset lighted Average Interest Acumulated Rotte Apenditus logow So Avoidable Interest - $ 11,000 Interest Capitalized = $11,000 1,000 Working

DE PAGE De Jornal Entries: date Account (redit) to Il-31 Gash) Beni All 80,000 Notes payable 20,000 JW-31 Machinery All Cashback All alo,ow g. 40,0w 1 octor Machinery the 120.000 Cash flank 120,000 Decal Machinery Alc [from Workers 11000 Interest Expense 12,667 | Bal-fig) Cash Banke ale 83,000 [lovedo x 84. + 150 pou y 10%) Intuest payable 3,6 67 [80,0000 1181x5/12