On February 1, 2018, Sun Devil Company purchased land for a warehouse & distribu

Question

On February 1, 2018, Sun Devil Company purchased land for a warehouse & distribution center for $540,000. To help finance the land and construction of the distribution center, $1,725,000 was borrowed on February 1, 2018 on a 9%, 3-year note payable, with interest payable annually every February 1st. Sun Devil began construction on the facility on March 1st. The following expenditures were incurred for construction:

The facility was completed and ready for occupancy on August 31st. Other than the construction note, the only debt outstanding during 2018 was a $500,000, 12%, 6-year note payable dated January 1, 2017.

a. Determine the Weighted Average Accumulated Expenditures: $___________________________

2256000

Question 3

0 out of 1 points

Using the information presented in #2 above, determine the Avoidable Interest: $_____________________

*Round all answers to the nearest whole dollar.

125562.5

Question 4

0 out of 1 points

Using the information presented in #2 above, determine the historical cost Sun Devil should report for the warehouse & distribution center:    $_____________________________________

*Round all answers to the nearest whole dollar.

3869562.5

Question 5

0 out of 1 points

Using the information presented in #2 above, determine Interest Expense for the year ended December 31, 2018:    $_____________________________

*Round all answers to the nearest whole dollar.

25000

Question 6

0 out of 1 points

If instead of having $500,000 of non-specific borrowing in #2 above, suppose Sun Devil only had $75,000 of other long-term debt at 12% that was dated January 1, 2017. In this case, what amount of interest cost should be capitalized? $_______________________

*Round all answers to the nearest whole dollar.

95812.5

On February 1, 2018, Sun Devil Company purchased land for a warehouse & distribution center for $540,000. To help finance the land and construction of the distribution center, $1,725,000 was borrowed on February 1, 2018 on a 9%, 3-year note payable, with interest payable annually every February 1st. Sun Devil began construction on the facility on March 1st. The following expenditures were incurred for construction:

March 1 $ 360,000 May 1 $ 504,000 June 1 $ 900,000 August 1 $1,440,000

The facility was completed and ready for occupancy on August 31st. Other than the construction note, the only debt outstanding during 2018 was a $500,000, 12%, 6-year note payable dated January 1, 2017.

a. Determine the Weighted Average Accumulated Expenditures: $___________________________

Selected Answer:

2256000

Explanation / Answer

Note; Solution for only First Part provided as per Chegg Policy.

Determination of weighted average accumulated Expenditures Period Amount of expenditure Weight Factor Weighted average accumulated expenditure Feb-01 $540,000.00 6/12 $270,000.00 Mar-01 $360,000.00 6/12 $180,000.00 May-01 $504,000.00 4/12 $168,000.00 Jun-01 $900,000.00 3/12 $225,000.00 Aug-01 $1,440,000.00 1/12 $120,000.00 Total $3,744,000.00 $963,000.00 Hence, Weighted average accumulated expenditure $963,000.00

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