Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Blossom Inc. is a book distributor that had been operating in its original facility since 1990. The increase in certification programs and continuing education requirements

Blossom Inc. is a book distributor that had been operating in its original facility since 1990. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Blossom since 2015. Blossom original facility became obsolete by early 2020 because of the increased sales volume and the fact that Blossom now carries CDs in addition to books. On June 1, 2020, Blossom contracted with Black Construction to have a new building constructed for $5,040,000 on land owned by Blossom. The payments made by Blossom to Black Construction are shown in the schedule below.

Date

Amount

July 30, 2020

$1,134,000

January 30, 2021

1,890,000

May 30, 2021

2,016,000

Total payments

$5,040,000

Construction was completed and the building was ready for occupancy on May 27, 2021. Blossom had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2021, the end of its fiscal year.

10%, 5-year note payable of $2,520,000, dated April 1, 2017, with interest payable annually on April 1.
12%, 10-year bond issue of $3,780,000 sold at par on June 30, 2013, with interest payable annually on June 30.

The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material.

(a)

Compute the weighted-average accumulated expenditures on Blossoms new building during the capitalization period.

Weighted-Average Accumulated Expenditures

$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Managerial Accounting For MBAs

Authors: Peter D. Easton, John J. Wild, Robert F. Halsey, Mary Lea McAnally

5th Edition

1618532324, 9781618532329

More Books

Students also viewed these Accounting questions