On July 31, 2019, Bismarck Company

engaged Duval Tooling Company to construct a special-purpose piece of factory

machinery. Construction began immediately and was completed on November 1,

2019. To help finance construction, on July 31 Bismarck issued a $400,000, 3-year,

12% note payable at Wellington National Bank, on which interest is payable each

July 31. $300,000 of the proceeds of the note was paid to Duval 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, Bismarck

made a final $100,000 payment to Duval. Other than the note to Wellington,

Bismarck's only outstanding liability at December 31, 2019, is a $30,000, 8%, 6-year

note payable, dated January 1, 2016, on which interest is payable each December

31.

Instructions

a. Calculate the interest revenue, weighted-average accumulated expenditures,

avoidable interest, and total interest cost to be capitalized during 2019. (Round

all computations to the nearest dollar.)

b. Prepare the journal entries needed on the books of Bismarck Company at each

of the following dates.

1. July 31, 2019.

2. November 1, 2019.

3. December 31, 2019