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PROBLEM 10-6

# PROBLEM 10-6 - 1-Jan 1,220 6/12 610 1-Mar 240,000 4/12...

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PROBLEM 10-6 Interest Capitalization Balance in the Land Account Purchase Price \$142,000 Surveying Costs 2,000 Title Insurance Policy 4,000 Demolition Costs 3,000 Salvage (1,000) Total Land Cost \$150,000 Expenditures (2005) Date Amount Fraction Weighted—Average Accumulated Expenditures 1-Dec \$150,000 1/12 \$12,500 1-Dec 30,000 1/12 2,500 1-Dec 3,000 1/12 250 \$183,000 \$15,250 Interest Capitalized for 2005 Weighted—Average Accumulated Expenditures Interest Rate Amount Capitalizable \$15,250 0.08 \$1,220 Interest charged to Interest Expense

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[(\$600,000 X .08 X 1/12) – \$1,220] \$2,780 10-55 PROBLEM 10-6 (Continued) Expenditures (2006) Date Amount Fraction Weighted Expenditure 1-Jan \$183,000 6/12 \$ 91,500
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Unformatted text preview: 1-Jan 1,220 6/12 610 1-Mar 240,000 4/12 80,000 1-May 360,000 2/12 60,000 1-Jul 60,000 0 0 \$844,220 \$232,110 Interest Capitalized for 2006 Weighted Expenditure Interest Rate Amount Capitalizable \$232,110 0.08 \$18,568.80 Interest charged to Interest Expense [(\$600,000 X .08) \$18,568.80] \$29,431.20 (a) Balance in Land Account2005 and 2006 150,000.00 (b) Balance in Building2005 34,220.00* Balance in Building2006 712,788.80** (c) Balance in Interest Expense2005 2,780.00 Balance in Interest Expense2006 29,431.20 *\$30,000 + \$3,000 + \$1,220 **\$34,220 + \$240,000 + \$360,000 + \$60,000 + \$18,568.80 10-56...
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