Problem 10-7 Teal 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 Teal since 2012. Teal' original facility became obsolete by early 2017 because of the increased sales volume and the fact that Teal now carries CDs in addition to books. On June 1, 2017, Teal contracted with Black Construction to have a new building constructed for $4,400,000 on land owned by Teal. The payments made by Teal to Black Construction are shown in the schedule below. Date Amount July 30, 2017 January 30, 2018 May 30, 2018 Total payments $990,000 1,650,000 1,760,000 $4,400,000 Construction was completed and the building was ready for occupancy on May 27, 2018. Teal 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 $2,200,000, dated April 1, 2014, with interest payable annually on April 1. 12%, 10-year bond issue of $3,300,000 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. * Your answer is incorrect. Try again. Compute the weighted-average accumulated expenditures on Teal's new building during the capitalization period. Weighted-Average Accumulated Expenditures Compute the avoidable interest on Teal's new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to O decimal places, e.g. 5,125.) Avoidable Interest 198800 x Your answer is incorrect. Try again. Some interest cost of Teal Inc. is capitalized for the year ended May 31, 2018. Compute the amount of each items that must be disclosed in Teal's financial statements. Total actual interest cost 795200 Total interest capitalized 198800 Total interest expensed 596400 Problem 10-7 Teal 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 Teal since 2012. Teal' original facility became obsolete by early 2017 because of the increased sales volume and the fact that Teal now carries CDs in addition to books. On June 1, 2017, Teal contracted with Black Construction to have a new building constructed for $4,400,000 on land owned by Teal. The payments made by Teal to Black Construction are shown in the schedule below. Date Amount July 30, 2017 January 30, 2018 May 30, 2018 Total payments $990,000 1,650,000 1,760,000 $4,400,000 Construction was completed and the building was ready for occupancy on May 27, 2018. Teal 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 $2,200,000, dated April 1, 2014, with interest payable annually on April 1. 12%, 10-year bond issue of $3,300,000 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. * Your answer is incorrect. Try again. Compute the weighted-average accumulated expenditures on Teal's new building during the capitalization period. Weighted-Average Accumulated Expenditures Compute the avoidable interest on Teal's new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to O decimal places, e.g. 5,125.) Avoidable Interest 198800 x Your answer is incorrect. Try again. Some interest cost of Teal Inc. is capitalized for the year ended May 31, 2018. Compute the amount of each items that must be disclosed in Teal's financial statements. Total actual interest cost 795200 Total interest capitalized 198800 Total interest expensed 596400
