Question
Early in 2020, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1,
Early in 2020, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2020 and was completed on December 31, 2020. Dobbs made the following payments to Kiner, Inc. during 2020:
Date | Payment | ||
June 1, 2020 | $2,040,000 | ||
August 31, 2020 | 3,060,000 | ||
December 31, 2020 | 2,550,000 |
In order to help finance the construction, Dobbs issued the following during 2020:
1. | $1,734,000 of 10-year, 9% bonds payable, issued at par on May 31, 2020, with interest payable annually on May 31. |
2. | 300,000 shares of no-par common stock, issued at $10 per share on October 1, 2020. |
In addition to the 9% bonds payable, the only debt outstanding during 2020 was a $433,500, 12% note payable dated January 1, 2016 and due January 1, 2023, with interest payable annually on January 1. Compute the amounts of each of the following:
1. | Weighted-average accumulated expenditures qualifying for capitalization of interest cost. | |
2. | Avoidable interest incurred during 2020. | |
3. | Total amount of interest cost to be capitalized during 2020. |
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