Chapter 10 E10-8

Chapter 10 E10-8 - 160,000 $960,000 Note : Use avoidable...

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EXERCISE 10-8 (a) Computation of Weighted-Average Accumulated Expenditures Expenditures Date Amount X Capitalization Period = Weighted-Average Accumulated Expenditures March 1 $ 360,000 10/12 $ 300,000 June 1 600,000 7/12 350,000 July 1 1,500,000 6/12 750,000 December 1 1,200,000 1/12 100,000 $3,660,000 $1,500,000 Computation of Avoidable Interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest $1,500,000 12% (Construction loan) $180,000 Computation of Actual Interest Actual interest $3,000,000 X 12% $360,000 $4,000,000 X 11% 440,000 $1,600,000 X 10%
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Unformatted text preview: 160,000 $960,000 Note : Use avoidable interest for capitalization purposes because it is lower than actual interest. (b) Building. ..................................................................................... 180,000 Interest Expense*. ..................................................................... 780,000 Cash ($360,000 + $440,000 + $160,000). ...................... 960,000 *Actual interest for year $ 960,000 Less: Amount capitalized (180,000 ) Interest expense debit $ 780,000...
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This note was uploaded on 10/31/2010 for the course FIN 82571 taught by Professor Sharp during the Fall '10 term at CSU Sacramento.

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Chapter 10 E10-8 - 160,000 $960,000 Note : Use avoidable...

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