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1 Question 1 Capitalization of interest. (15 points) During 2020. Winsor Company constructed a machinery at a total cost of $7,500,000. The construction began on
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Question 1 Capitalization of interest. (15 points) During 2020. Winsor Company constructed a machinery at a total cost of $7,500,000. The construction began on January 1 and was completed on December 31, 2020. Actual expenditures during 2020: January 1 $1,000,000 March 31 $3,600,000 September 1 $2,400,000 December 31 $500,000 Total $7.500.000 The company had the following debt outstanding on December 31, 2020: 11%, 5-year note to finance construction of machinery, dated January 1, 2020. $3.500.000 2. 10%, 20-year bonds issued at par on July 1, 2018. $4,000,000 3. 12%, 10-year note payable, dated January 1, 2019. Instructions Compute the amounts of each of the following (show computations for each part). 1. Weighted average accumulated expenditures. (3 points) 1. $6,000,000 2. Avoidable interest. (4 points) Computation of weighted average interest rate for general debts: Avoidable interest x 3. Total actual interest cost. (3 points) Actual interest cost 4. Total interest to be capitalized during 2020 is $ because (2 points) 5. Prepare the Journal entries needed on the book of Winsor Company to capitalize interest. (3 points) Account Debit Credit Step by Step Solution
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