Intermediate Accounting

P11-2

Capitalization of Interest, Specific and General Debt, Computing Weighted Average Accumulated Expenditures, US GAAP. On January 1, 2104, Union Power and Light commenced construction of a new generating plant to serve the northeast corridor of the state. The total cost of the project is $4,100,000 and it will be completed on June 1, 2015. Scheduled payments to contractors are summarized in the following table.

Date Amount paid

Jan 1, 2014 $950,000

April 1, 2014 $300,000

July 1, 2014 $1,200,000

TOtal 2104 $1,450,000

Febuary 1, 2015 $1,150,000

April 1, 2015 $500,000

Total 2014 $1,650,000

Total expenditures $4,100,000

To finance the project, Union Power obtained a bank loan on Jan 1, 2014 for $1,800,000 at 10% interest. Unions ohter general or direct outstanding debt during 2014 and 2015 includes the following:

General Debt Amount

7% Note $1,000,000

9% Note $3,500,000

6% Bonds $2,000,000

Total $6,500,000

All debt was issued at par and is outstanding for the full year. Interest for all debt is paid on December 31.

REQUIRED:

A.) Determine the amount of interest to be capitalized and expensed by Union Power Company for both 2014 and 2015.

l journal entries required.

C) Determine the final valuation of the power plant.