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LY borrowed $25,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $20,000 note payable and a 10%, 8-year, $30,000 note payable, Construction began on Feb. 1 and was completed on Dec 31. Expenditures were $15,000 on March 1, $12,000 on June 1, & $30,000 on
Dec 31.
Required:
1. Compute LY's weight-average accumulate expenditures for interest capitalization purposes.
2. Compute the weight-average interest rate used for interest
capitalization purposes. 3. Compute avoidable interest and actual interest for LY.
4. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense.
Sagot :
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