Question 1 (Capitalization of Interest) The Company found that it needed a very specialized piece of equipment which was not available in the United States. A very similar piece of equipment was available from Germany but fabrication would take about 6 months and then transportation would take another 3 months by sea transport. Since The Company needed the equipment as soon as possible, it was decided to have a USA company fabricate the equipment even though it would be more expensive than ordering the equipment from Germany. A contract was signed on August 1 with delivery promised on or before December 31. On the date the contract was signed The Company borrowed $300,000 from Local Bank at 12% due in 3 years. Interest is due annually on August 1. On August 1, The Company made a$200,000 down payment to the contractor. In early October, the contractor notified The Company that the order would be available on October 31 and that the final progress payment of $100,000 would be due on that date. Other than the $300,000 borrowed specifically for construction of the specialized piece of equipment, The Company had only one other outstanding debta $30,000, 8%, 4-year note, dated December 31, 2 years ago, which had interest payable each December 31. Calculate the following: a. Weight-average accumulated expenditures b. Avoidable interest c. Total interest cost to be capitalized in the current year Prepare journal entries needed at each date of the current year a. August 1 b. October 31 c. December 31