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 d ntreti during 2013. Payment Date January1 March 1 October 1 November1 $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 $10,000,000, 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 3. The actual interest 4. The amount of interest cost to be capitalized during 2013. 5. Prepare the journal entry to record total interest cost incurred, assuming that all interest was paid in cash:

Explanation / Answer

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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                  30,75,000

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