Early in 2017, Dobbs Corporation engaged Kiner, Inc. to design and construct a c

Question

Early in 2017, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete , 2017 and was completed on December 31, 2017. Dobbs made the following payments to Kiner, Inc. during 2017: ization of s manufacturing facility. Construction was begun on June June 1, 2017 August 31, 2017 December 31, 2017 $5,856,000 9,120,000 7,440,000 In order to help finance the construction, Dobbs issued the following during 2017: 1. $5,110,000 of 10-year, 9% bonds payable, issued at par on May 31, 2017, with interest payable annually on May 31. 2. 300,000 shares of no-par common stock, issued at $10 per share on October 1, 2017 In addition to the 9% bonds payable, the only debt outstanding during 2017 was a $1,247,000, 12% note payable dated January 1, 2013 and due January 1, 2023, with interest payable annually on January 1. Compute the amounts of each of the following Weighted-average accumulated ekenditures qualifying for capitalization of interest cost. 2. 1. Avoidable interest incurred during 2017 3. Total amount of interest cost to be capitalized during 2017. i. Weighted-average accumulated expenditures s 2. Avoidable interest 3. Amount of interest cost to be capitalized

Explanation / Answer

1.

2.

Capitalized interest = weighted-average accumulated expenditures up to the principal balance of specific borrowing * interest rate on that specific borrowing + weighted-average accumulated expenditures in excess of specific borrowing * weighted-average interest rate.

3. 2,68,275.00

Payment Date Expenditure Captilization Period Weight Weighted Expenditures (A) (B) ©=(B)/(A) A*C 01-06-2017 58,56,000.00 7 Months 0.58                         34,16,000.00 31-08-2017 91,20,000.00 4 Months 0.33                         30,40,000.00 31-12-2017 74,40,000.00 0 Months 0.00                                              -                           64,56,000.00

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