Vishnu Meriter Company began construction of a new building during 2025. The building is expected to becompleted on December 31, 2025. During 2025, payments to the contractor are $500,000 onJanuary 4, $300,000 on May 1, and $420,000 on October 1. Meriter has secured a construction loanof $500,000 at 6% interest on January 4, 2025. The company also has $10,000,000 in 9% bondsoutstanding in 2026 and 2025. What is the interest amount to capitalize?Interest to capitalize$

As per IAS 23:In the case of a specific loan used for an activity - Interest to be capitalized will…

Answered: Interest to capitalize $

Business

Accounting

Interest to capitalize $

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....

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On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Metlock Company began construction of a new building during 2025. The building is expected to be completed on December 31, 2025. During 2025, payments to the contractor are $540,000 on January 4, $252,000 on May 1, and $456,000 on October 1. Metlock has secured a construction loan of $506,000 at 6% interest on January 4, 2025. The company also has $8,850,000 in 9% bonds outstanding in 2026 and 2025. What is the interest amount to capitalize? Interest to capitalize $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer
Metlock Company began construction of a new building during 2025. The building is expected to be completed on December 31, 2025. During 2025, payments to the contractor are $540,000 on January 4, $252,000 on May 1, and $456,000 on October 1. Metlock has secured a construction loan of $506,000 at 6% interest on January 4, 2025. The company also has $8,850,000 in 9% bonds outstanding in 2026 and 2025. What is the interest amount to capitalize? Interest to capitalize $
Vaughn Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,000,000 on January 1, 2025. Vaughn expected to complete the building by December 31, 2025. Vaughn has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2024 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026 Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029 (a) Assume that Vaughn completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to O decimal places, e.g. 5,275.)…
On June 1, 2023, a company began construction of a new manufacturing plant. The plant was completed on October 31, 2024. Expenditures on the project were as follows ($ in millions): July 1, 2023 October 1, 2023 February 1, 2024 April 1, 2024 September 1, 2024 October 1, 2024 On July 1, 2023, the company obtained a $94 million construction loan with a 8% interest rate. The loan was outstanding through the end of October, 2024. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 10%. This note was outstanding during all of 2023 and 2024. The company's fiscal year-end is December 31. What is the amount of interest that should be capitalized in 2023, using the specific interest method? Multiple Choice $3.99 million $4.04 million 78 46 54 33 32 18 $5.05 million None of the other answer choices are correct
Compute the depreciation expense for the year ended December 31, 2026. Sheridan elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $360,000. (Round answer to O decimal places, e.g. 5,275.) Depreciation expense $ 360000
Sunland Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $9,000,000 on January 1, 2025. Sunland expected to complete the building by December 31, 2025. Sunland has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2024 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026 Long-term loan-11% interest, payable on January 1 of each year: principal payable on January 1, 2029 (a) (b) Compute the depreciation expense for the year ended December 31, 2026. Sunland elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $540,000. (Round answer to O decimal places, e.g. 5,275.) Depreciation expense $3,600,000 2,700,000 1,800,000 $
Bonita Corporation began constructing a new plant facility in 2025. The building is expected to be completed on October 1, 2025. 2025 payments to the contractor are $204,000 on January 4, $336,000 on April 1, $312,000 on July 1 and $114,000 on September 1. Bonita has secured a construction loan of $600,000 at 6% interest on January 4, 2025. Bonita has no other debt outstanding. What is the interest amount to capitalize? Interest to capitalize $
Doeren Inc. began constructing a building for its use on January 1, 2022. All costs associated with the construction are being debited to an account called “Construction-in-Progress.” The construction will take approximately 24 months. Weighted-average expenditures for 2022 have already been determined to be $5,000,000. The company has one specific, as well as two non-specific loan borrowings. Details are as follows: Specific Loan Borrowing: $4,000,000 loan at 9% taken out 1/1/2022 and due in 2025. Non-specific Borrowings: Note #1: $2,000,000 at 10%. This loan was outstanding for all of 2022 and is due in 2023. Note #2: $500,000 at 12%. This loan was outstanding for all of 2022 and is due in 2024. If the company has already accrued and paid the 2022 interest costs on these three loans by debiting “Interest Expense” and crediting “Cash”, what adjusting journal entry should be made on 12/31/22 to capitalize interest in 2022?
Marigold Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,000,000 on January 1, 2025. Marigold expected to complete the building by December 31, 2025. Marigold has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2024 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026 Long-term loan-11% interest, payable on January 1 of each year, principal payable on January 1, 2029 (a) $1,600,000 Avoidable interest 1,200,000 800,000 Assume that Marigold completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $4,160,000, and the weighted-average amount of accumulated expenditures was $2,880,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round…
Doeren Inc. began constructing a building for its use on January 1, 2022. All costs associated with the construction are being debited to an account called “Construction-in-Progress.” The construction will take approximately 24 months. Weighted-average expenditures for 2022 have already been determined to be $5,000,000. The company has one specific, as well as two non-specific loan borrowings. Details are as follows: Specific Loan Borrowing: $4,000,000 loan at 9% taken out 1/1/2022 and due in 2025. Non-specific Borrowings: Note #1: $2,000,000 at 10%. This loan was outstanding for all of 2022 and is due in 2023. Note #2: $500,000 at 12%. This loan was outstanding for all of 2022 and is due in 2024. A) What portion of the interest on all of its loans should be capitalized in 2022?
On January 1, 2021, the company obtained a $3 million loan with a 12% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 $ 1,240,000 March 1, 2021 660,000 June 30, 2021 450,000 October 1, 2021 650,000 January 31, 2022 900,000 April 30, 2022 1,215,000 August 31, 2022 2,160,000 On January 1, 2021, the company obtained a $3 million construction loan with a 12% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $5,400,000 and $7,400,000 with interest rates of 6% and 8%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required:1. Calculate the amount of interest that Mason should…