xercise 10-9 On July 31, 2017, Indigo Company engaged Minsk Tooling Company to c
ID: 2569597 • Letter: X
Question
xercise 10-9 On July 31, 2017, Indigo 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 Indigo issued a $301,200, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31, $195,200 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, Indigo made a final $106,000 payment to Minsk. Other than the note to Netherlands, Indigo's only outstanding liability at December 31 2017, is a $30,300, 896 6-year note payable dated January 1,2014, on which interest is payable each December 31 Your answer is partially correct. Try again. Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017 nterest revenue 2650 Weighted-average accumulated expenditures 4880 Avoidable interest Interest capitalizedExplanation / Answer
SOLUTION
Interest Revenue-
$106,000 * 10% * 3/12 = $2,650
Weighted average accumulated expenditure-
Avoidable Interest-
Avoidable interest = Weighted-Average Accumulated Expenditures * Interest Rate
= $48,800 * 12% = $5,856
Actual interest cost -
Interest capitalized = $5,856
Date Amount (A) ($) Capitalization period (B) Weighted-Average Accumulated Expenditures (A*B) ($) July 31 195,200 3/12 48,800 Nov. 1 106,000 0 0 48,800Related Questions
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