Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Flint Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements

Flint Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Flint since 2012. Flint original facility became obsolete by early 2017 because of the increased sales volume and the fact that Flint now carries CDs in addition to books. On June 1, 2017, Flint contracted with Black Construction to have a new building constructed for $4,560,000 on land owned by Flint. The payments made by Flint to Black Construction are shown in the schedule below.

Date

Amount

July 30, 2017

$1,026,000

January 30, 2018

1,710,000

May 30, 2018

1,824,000

Total payments

$4,560,000

Construction was completed and the building was ready for occupancy on May 27, 2018. Flint had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2018, the end of its fiscal year.

10%, 5-year note payable of $2,280,000, dated April 1, 2014, with interest payable annually on April 1.
12%, 10-year bond issue of $3,420,000 sold at par on June 30, 2010, 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.

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

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_2

Step: 3

blur-text-image_3

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

More Books

Students also viewed these Accounting questions

Question

What are the sources of within-groups variability?

Answered: 1 week ago