Problem 1 (20 Points) On January 1, 2013, Inter Corporation started the construc

Question

Problem 1 (20 Points) On January 1, 2013, Inter Corporation started the construction of a building to use as its corporate headquarters. The project was completed and ready for occupancy on December 31, 2013. Inter incurred the following expenditures related to construction during 2013: Date January 1 March 1 October1 November $1,800,000 1,200,000 900,000 300,000 In order to help finance the construction, on January 1,2013, Inter obtained a S1,000,000 construction loan with a 8% interest rate. In addition to the 10 % bonds payable, the company had outstanding all year a S4 000 000, 6% note payable and a S!0,000,000, 7%, note payable. Instructions: Compute the amounts of each of the following (show your computations and label your work weighted-average accumulated expenditures 2. Avoidable interest 3The actual interest 5. Prepare the journal entry to record total interest cost incurred, assuming that all interest was paid in cash:

Explanation / Answer

1.

2.

3.

4.

Journal:

Date Amount incurred No. of months Weighted average amount a b c=a*b/12 Jan.1        18,00,000                          12                  18,00,000 Mar.1        12,00,000                          10                  10,00,000 Oct.1          9,00,000                             3                    2,25,000 Nov.1          3,00,000                             2                        50,000 Accumulated expenditure                  12,75,000

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