Question

now all supporting computations. Points will be deduel Il you UU HUL JUTJU 1. On March 1, Morris Co. began construction of a small building. The following expenditures were incurred for construction: March 1 S 150.000 April 1 S 148,000 May 1 360,000 June 1 540,000 July 1 200,000 The building was completed and occupied on July 1. To help pay for construction $100,000 was borrowed on March 1 on a 4%, three-year note payable. The only other debt outstanding during the year was a $1,000,000, 6% note issued two years ago. (4 points) (a) Calculate the weighted average accumulated expenditures. (b) Calculate the avoidable interest. (c) Calculate actual interest. (d) What amount of interest should be capitalized as part of the cost of the building?

Answer 1

Solution' & Assis completad las WAA& in 4 months in 4 mo WIARE Month Amount Capitalised Period March 1 April May 150000 $ 148,000 $ 360,000 $ 40,000 $ 900,000 4/month 3/4 manith 2/4 month 415,000 1/1000 $180001 June 1/4 month $ 10,000 July! Total Amant wed 4456000 (6) Allsidable Interest for 4 monts INLAAGE WAAE $4000 Carstruction Remaining 451,000 lamm - 100,000 X 44. 35,1000 x 6%. $21060 1 25060 To Actual interest for full year construction Loan Interest 2 100,000 X 407 other loan interest Cest = 1,000,000. X 6'. $60,000 $ 4000 Actual Total Interest $64,000

(d) Amount of Interest sholead be capitalize of = Lower of Avoidable' Srilesest 02 Aclisel - $25,060 miteest I 02 Beeman Rebit 1 credit Machinery (New) $1695000 Acc. Dep $1,350,000 Cash received $ 69000 Machinery cold) $ 9,700,000 Profit on disposal explanation & Exchange is to be accounted at faile I value in commerical substance fair value = 1,755000 couts deceived = (66000 value given $169.5poo value given up and fail Icalue is some Lacey Machinery (New) $ 1782,000 Machinery cold) cash paid $ 60,000 Profit on disposal $1,755000 Acc. Depo $ 3,940,000 9237000

VINPUT WWUWWII explanation f fair value 1,695000 Cash paid Goooo value given up 7,75.5000 imparte up a pail scalue is so in given Value