Problem 1: Interest Capitalization

On January 1, 2020, Greenfield Corp. began construction of a new production plant. The production plant was finished and ready for use on December 31, 2020. Expenditures for the construction were as follows:

January 1, 2020	$1,000,000
April 1, 2020	2,000,000
June 30, 2020	4,800,000
July 31, 2020	1,200,000
December 1, 2020	600,000

Greenfield Corp. borrowed $3,000,000 on a construction loan at 10% interest on January 1, 2020. This loan was outstanding during the construction period. The company also had $8,000,000 in 8% bonds payable and $2,000,000 in notes payable at 12% outstanding during 2020.

Instructions:

(a) Compute the weighted-average accumulated expenditures for the production plant.

(b) Compute the 2020 actual interest expense for Greenfield Corp.

(c) Compute the 2020 avoidable interest for the automated plant

(Round interest rates 2 decimals e.g., 10.1467% becomes 10.15%. Round to whole dollar amounts e.g., $5.52 becomes $6.)

(d) All 2020 interest payments have been debited to the Interest Expense account. Prepare the journal entry at 12/31/20 for capitalized interest in the automated plant.