AccountingQueen
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The following three situations involve the capitalization of interest. Situation I On January 1, 2017, Marigold, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4, 323,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2017, to finance the construction cost, Marigold borrowed $4, 323,000 payable In 10 annual installments of $432, 300, plus interest at the rate of 10%. During 2017, Marigold made deposit and progress payments totaling $1, 621, 125 under the contract; the weighted-average amount of accumulated expenditures was $864, 600 for the year. The excess borrowed funds were invested in short-term securities, from which Marigold realized investment income of $252, 200. What amount should Marigold report as capitalized interest at December 31, 2017? Capitalized interest $ _________ Situation II During 2017, Swifty Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. All of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? The total amount of interest costs to be capitalized $ _________ Situation III Nash, Inc. has a fiscal year ending April 30. On May 1, 2017, Nash borrowed $9, 188,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2018, expenditures for the partially completed structure totaled $6, 431, 600. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $597, 220 for the year. How much should be shown as capitalized interest on Nash's financial statements at April 30, 2018? Capitalized interest on Nash's financial statements $ ___
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Exercise 10-9 (Part Level Submission)
On July 31, 2017, Sunland Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Sunland issued a $322,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $222,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Sunland made a final $100,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2017, is a $32,800, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.
(a)
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017.
Interest revenue (322,800-222,800)*.1/(12/3) = $2500
Weighted-average accumulated expenditures (222,800/(12/3)) = $ 55700
Avoidable interest (55,700*.12) = $ 6684On July 31, 2017, Sunland Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Sunland issued a $322,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $222,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Sunland made a final $100,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2017, is a $32,800, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.
(a)
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017.
Interest revenue (322,800-222,800)*.1/(12/3) = $2500
Weighted-average accumulated expenditures (222,800/(12/3)) = $ 55700
Avoidable interest (55,700*.12) = $ 6684
Interest capitalized $
​Please show math
  Intermediate Accounting
P11-2
Capitalization of Interest, Specific and General Debt, Computing Weighted Average Accumulated Expenditures, US GAAP. On January 1, 2104, Union Power and Light commenced construction of a new generating plant to serve the northeast corridor of the state. The total cost of the project is $4,100,000 and it will be completed on June 1, 2015. Scheduled payments to contractors are summarized in the following table.
Date Amount paid
Jan 1, 2014 $950,000
April 1, 2014 $300,000
July 1, 2014 $1,200,000
TOtal 2104 $1,450,000
Febuary 1, 2015 $1,150,000
April 1, 2015 $500,000
Total 2014 $1,650,000
Total expenditures $4,100,000
To finance the project, Union Power obtained a bank loan on Jan 1, 2014 for $1,800,000 at 10% interest. Unions ohter general or direct outstanding debt during 2014 and 2015 includes the following:
General Debt Amount
7% Note $1,000,000
9% Note $3,500,000
6% Bonds $2,000,000
Total $6,500,000
All debt was issued at par and is outstanding for the full year. Interest for all debt is paid on December 31.
REQUIRED:
A.) Determine the amount of interest to be capitalized and expensed by Union Power Company for both 2014 and 2015.
l journal entries required.
C) Determine the final valuation of the power plant.
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