On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a

Question

On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2014. To help finance construction, on July 31 Amsterdam issued a $518,400, 3-year, 10% note payable at Netherlands National Bank, on which interest is payable each July 31. $380,400 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 8% until November 1. On November 1, Amsterdam made a final $138,000 payment to Minsk. Other than the note to Netherlands, Amsterdam’s only outstanding liability at December 31, 2014, is a $32,800, 6%, 6-year note payable, dated January 1, 2011, on which interest is payable each December 31. Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2014

Explanation / Answer

On July 31, 2014, Amsterdam Company engaged Minsk Tooling Company to construct a

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