Exercise i On July 31, 2017, Sage Company engaged Minsk Tooling Company to const

Question

Exercise i On July 31, 2017, Sage 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 Sage issued a $325,200, 3-year 12% note payable at Netherlands National Bank, on hich interest is payable each July 31 $222,200 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. Sage made a final 103,000 payment to Minsk. Other than the note to Netherlands, Sage's only outstanding liability at December 31, 2017, is a $32,400, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. (a) Your answer is correct. Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017. Interest revenue 2575 Weighted-average accumulated expenditures 55550 Avoidable interest Interest capitalized

Explanation / Answer

Solution: Following is the required journal entries:

Date Particulars Debit($) Credit($) 7/31 Cash 325,200 Note Payable 325,200 Machinery 222,200 Trading securities(325200-222200) 103,000 Cash 325,200 11/1 Cash 105,575 Interest Revenue(103000*10%*3/12) 2,575 Trading securities 103,000 Machinery 103,000 Cash 103,000 12/31 Machinery 6,666 Interest Expense(16260+2592-6666) 12,186 Cash(32400*8%) 2,592 Interest Payable(325200*12%*5/12) 16,260

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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