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Bailey Co. borrows $1,200,000 at 8% interest on December 1, 2014, to finance construction of a new building to be used in its operations. Construction
Bailey Co. borrows $1,200,000 at 8% interest on December 1, 2014, to finance construction of a new building to be used in its operations. Construction begins on February 1, 2015, and the construction expenditures shown below have been made by the end of 2015. The February 1, 2015 expenditure included $400,000 for the purchase of land. During 2015 Bailey earned $9,000 of interest income February 1, 2015 $ 960,000 April 1, 2015 $ 960,000 June 1, 2015 $ 840,000 October 1, 2015 $360,000 Total $3.120.000 Below is other debt, which had been issued at par in 2013 and remained outstanding during all of 2015: $2,000,000, 6%, 10-year bonds payable $1,000,000, 9%, 5-year note payable Required: a) Compute the weighted Average Accumulated Expenditures for the year ended 12/31/15 b) Compute the Avoidable Interest for the year ended 12/31/15. C) Assume that you computed the avoidable interest to be $165,000. Determine the amount of interest to capitalize. d) Determine the amount of interest to expense for the year ended 12/31/15
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