Thornton Industries began construction of a warehouse on July 1, 2018. The proje

Question

Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were requlred to fund construction. Thornton does have the following two Interest-bearing liablities that were outstanding throughout the construction period: $6,000,000, $9,800,000, 7% 3% note bonds Construction expenditures Incurred were as follows: July 1, 2818 September 38, 2818 November 38, 2818 January 30, 2819 70e,800 1,85e,8e8 1,85e,8ee 998,888 The company's fiscal year-end is December 31. Requlred Calculate the amount of Interest capitalized for 2018 and 2019. Complete this question by entering your answers in the tabs below 2018 2019 Calculate the amount of interest capitalized for 2018. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).) Date Expenditure Weight Average July 1, 2018 September 30, 2018 November 30, 2018 Accumulated expenditures Amount Interest Rate Interest Average accumulated e K 2018 2019>

Explanation / Answer

a) Calculation of weighted Average Interest rate (Amounts in $)

Weighted Average Interest Rate = Total Interest /Total Amount of loan

= $690,000/$15,000,000 = 4.6%

Calculation of capitalized interest for 2018 (Amounts in $)

Capitalized interest for 2018 = Average Accumulated Expenditured*Interest Rate*6/12

= $1,400,000*4.6%*6/12 = $32,200

Therefore interest to be capitalized for 2018 is $32,200.

Calculation of capitalized interest for 2019 (Amounts in $)

Capitalized interest for 2019 = Average Accumulated Expenditured*Interest Rate*6/12

= $3,492,200*4.6%*3/12 = $40,160.30

Therefore interest to be capitalized for 2019 is $40,160.30.

Loan Amount Interest on Loan 7% Note 6,000,000 ($6,000,000*7%) = 420,000 3% Bonds 9,000,000 ($9,000,000*3%) = 270,000 Total 15,000,000 690,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.