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Question 1 (20 marks) Early in 2019, KK Corporation engaged Pro, Inc. to design and construct a new production plant. Construction was begun on April
Question 1 (20 marks) Early in 2019, KK Corporation engaged Pro, Inc. to design and construct a new production plant. Construction was begun on April 1, 2019 and was completed on December 31, 2019. Dobbs made the following payments to Pro, Inc. during 2019: Date April 1, 2019 July 31, 2019 December 31, 2019 Payment $4,700,000 $6,000,000 $3,600,000 In order to help finance the construction, KK issued the following during 2019: $2,000,000 of 10-year, 8% bonds payable, issued at par on March 31, 2019, with interest payable annually on March 31. In addition to the 8% bonds payable, the debts outstanding during 2019 included the following: 1. 12%, 10-year bonds issued at par on December 31, 2013, with interest payable annually on December 31 $4,500,000 9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1 $3,000,000 Required (a) Compute the amounts of each of the following (show computations): (i) Weighted-average accumulated expenditures qualifying for capitalization of interest costs. (4 marks) (ii) Avoidable interest incurred during 2019. (6 marks) (iii) Actual interest incurred during 2019. (3 marks) (iv) Total amount of interest cost to be capitalized during 2019. (2 marks) (b) Prepare a journal entry to record for the interest expense on 31 December 2019
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