Exercise 10 -9 On July 31, 2017, Cheyenne Company engaged Minsk Tooling Company
ID: 2518004 • Letter: E
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Exercise 10 -9 On July 31, 2017, Cheyenne 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 Cheyenne issued a $314,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31 $206,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily in ested in short-term marketable securities trading securities at 10 % until November 1. On November 1, Cheyenne made a final $108,000 payment to Minsk. Other than the note to Netherlands, Cheyenne's only outstanding liability at December 31, 2017, is a $32,600, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. Cheyenneissueda$314,400 3-year 12% no e parable at Nether short-term marketable securities trading sec Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017 tobe daring 2017. Interest revenue Weighted-average accumulated expenditures Avoidable interest Interest capitalized sExplanation / Answer
Minsk Date Expenditure Capital Period WAAE 31-Jul 206400 3 / 12 51600 01-Nov 108000 0 0 51600 Construction finance rate 12% Avoidable interest 6192 Actual interest Construction 314400*12%*5/12 15720 Other 32600*8%*1 2608 18328 Date General Journal Debit Credit 07/31/2017 Cash 314400 Note payable 314400 Machine 206400 Trading securities 108000 Cash 314400 01/11/2017 Cash 110700 Interest Revenue 108000*10**3/12 2700 Trading securities 108000 Machinery 108000 Cash 108000 12/31/2017 Machinery 6192 Interest expense 12136 Cash 2608 Interest payable 15720
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