Question
On July 31, 2017, Pearl Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed
On July 31, 2017, Pearl Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Pearl issued a $278,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $188,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Pearl made a final $90,000 payment to Minsk. Other than the note to Netherlands, Amsterdams only outstanding liability at December 31, 2017, is a $32,000, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017.
Interest revenue $ |
Weighted-average accumulated expenditures |
$
Avoidable interest $
Interest capitalized $
Prepare the journal entries needed on the books of Pearl Company at each of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
(1) | July 31, 2017. | |
(2) | November 1, 2017. | |
(3) | December 31, 2017. |
Date
Account Titles and Explanation
Debit
Credit
7/3111/112/31
(To record the note.)
(To record the payment to Minsk.)
7/3111/112/31
(To record the proceeds from the investment.)
(To record the payment to Minsk.)
12/31
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started