JB Incorporated began constructing a building on the 1st of January and complete
ID: 2571906 • Letter: J
Question
JB Incorporated began constructing a building on the 1st of January and completed construction on the 31st of December, of the same year. Cost on the construction during this one-year period were as follows: March 1 $3,200 June 1 2,280 Dec 31 4,000 On January 1,JB borrowed $1,600 to finance the construction. They signed a 5-year, 12% note when they borrowed the money. Additional debt JB owed during the entire year included a 10%, 3-year, $2,400 note and an 11%, 4-year, $6,000 note. (Round intermediate calculations to four decimals and final answers to whole dollars). (a) What are the weighted average accumulated expenditures? $ ____________________ (a) (5) (b) What is the amount of avoidable interest? (c) How much interest is capitalized for the year? Show how you made this decision.
Explanation / Answer
SOLUTION
(A)
(B) Computation of avoidable interest-
Avoidable interest =Weighted average accumulated expenditures * Interest rate
= $4,330 * 12% = $519.60
(C) Amount to be capitalized = $519.60
Date Amount ($) (A) Capitalization period (B) Weighted average accumulated expenditure (A*B) March1 3,200 10/12 2,667 June1 2,280 7/12 1,330 Dec.1 4,000 1/12 333 9,480 4,330Related Questions
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