On March 1, 2017, Sheridan Company purchased land for an office site by paying $2600000 cash. Sheridan began constructio...
On March 1, 2017, Sheridan Company purchased land for an office
site by paying $2600000 cash. Sheridan began construction on the
office building on March 1. The following expenditures were
incurred for construction:
| Date | Expenditures | |
| March 1, 2017 | $ 1810000 | |
| April 1, 2017 | 2490000 | |
| May 1, 2017 | 4420000 | |
| June 1, 2017 | 4700000 |
The office was completed and ready for occupancy on July 1. To help
pay for construction, and purchase of land $3670000 was borrowed on
March 1, 2017 on a 9%, 3-year note payable. Other than the
construction note, the only debt outstanding during 2017 was a
$1470000, 12%, 6-year note payable dated January 1, 2017.
Assume the weighted-average accumulated expenditures for the
construction project are $4370000. The amount of interest cost to
be capitalized during 2017 is
| $414300. |
| $150550. |
| $168900. |
| $131100. |
Homework Answers
If it is helpful, please rate the answer and if any doubt arises let me know
| Correct option is: $414,300 | ||||||
| Workings: | ||||||
| Interest Capitalized in 2017 | ||||||
| $ 43,70,000 | ||||||
| Less: | $ 36,70,000 | X | 9.00% | = | $ 3,30,300 | |
| $ 7,00,000 | X | 12.00% | = | $ 84,000 | ||
| Total Interest Capitalized in 2017 | = | $ 4,14,300 | ||||
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Problem 10-5 On January 1, 2020, Sheridan Corporation purchased for $680,000 a tract of land (site...
Problem 10-5
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Problem 10-5
On January 1, 2020, Sheridan Corporation purchased for $680,000 a
tract of land (site number 101) with a building. Sheridan paid a
real estate broker’s commission of $48,960, legal fees of $8,160,
and title guarantee insurance of $24,480. The closing statement
indicated that the land value was $680,000 and the building value
was $136,000. Shortly after acquisition, the building was razed at
a cost of $73,440.
Sheridan entered into a $4,080,000 fixed-price contract with
Slatkin Builders, Inc. on...
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