On January 1, 2018, the Shagri Company began construction on a new manufacturing

Question

On January 1, 2018, the Shagri Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The only interest-bearing debt the company had outstanding during 2018 was long-term bonds with a book value of $11,500,000 and an effective interest rate of 10%. Construction expenditures incurred during 2018 were as follows:

January 1 $ 650,000 March 1 690,000 July 31 570,000 September 30 750,000 December 31 450,000 Date Expenditure Weight Average January 1 x = March 1 x = July 31 x = September 30 x = December 31 x = Accumulated expenditure $0 $0 Average Interest Rate Capitalized Interest Average accumulated expenditures $0 x % = $0

Explanation / Answer

Date Expenditure X Weight = Average Jan-01 $     6,50,000 X 12/12 = $    6,50,000 Mar-01 $     6,90,000 X 10/12 = $    5,75,000 Jul-31 $     5,70,000 X 5/12 = $    2,37,500 Sep-30 $     7,50,000 X 3/12 = $    1,87,500 Dec-31 $     4,50,000 X 0/12 = $ -   Accumulated expenditure $ 31,10,000 $ 16,50,000 Average X Interest rate = Capitalized interest Average accumulated expenditure $ 16,50,000 X 10% = $    1,65,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---