Question

On January 1, 2016, Roger Company began construction of a new warehouse. The building was finished...

On January 1, 2016, Roger Company began construction of a new warehouse. The building was finished and ready for use on December 31, 2016. Roger Spent $4,650,000 on the building. These expenditures were made evenly throughout the year. Roger's only outstanding interest-bearing debt throughout 2016 was a $5,000,000 not payable. The interest rate on this debt was 6%. What amount should be reported as an interest expense on Roger's 2016 income statement?

Homework Answers

Answer #1
Calcualtion of weighted accumulatecd expenditure
Expenditure No. of mnth weight exp
Jan 387500 12/12 387500
Feb 387500 11/12 355208.3
Mar 387500 10/12 322916.7
Apr 387500 9/12 290625
May 387500 8/12 258333.3
June 387500 7/12 226041.7
July 387500 6/12 193750
Aug 387500 5/12 161458.3
Sep 387500 4/12 129166.7
Oct 387500 3/12 96875
Nov 387500 2/12 64583.33
Dec 387500 1/12 32291.67
4650000 2518750
in $
avoidable interest
2518750*6% 151125
Total Interest 300000
(5000000*6%)
Less: Avoidable interest 151125
Interest expense to be reported 148875 ans
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 300,000 September 1, 2018 $ 450,000 December 31, 2018 $ 450,000 March 31, 2019 $ 450,000 Dreamworld had the following debt obligations outstanding during both years: Construction loan, 10%             $500,000              Long-term note, 12%                      $2,500,000 Required: What would Dreamworld's capitalized interest be in 2018? $45,000 $134,000...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 300,000 September 1, 2018 $ 450,000 December 31, 2018 $ 450,000 March 31, 2019 $ 450,000 Dreamworld had the following debt obligations outstanding during both years: Construction loan, 10%             $500,000              Long-term note, 12%                      $2,500,000 Required: What would Dreamworld's capitalized interest be in 2019 (assuming interest...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 330,000 September 1, 2018 $ 495,000 December 31, 2018 $ 495,000 March 31, 2019 $ 495,000 September 30, 2019 $ 330,000 Dreamworld had $6,500,000 in 12% bonds outstanding through both years. The average accumulated expenditures for 2019 by the end of the construction period was:
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 328,000 September 1, 2018 $ 486,000 December 31, 2018 $ 486,000 March 31, 2019 $ 486,000 September 30, 2019 $ 328,000 Dreamworld had $6,200,000 in 12% bonds outstanding through both years. What was the final cost of Dreamworld's warehouse?
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 343,000 September 1, 2018 $ 501,000 December 31, 2018 $ 501,000 March 31, 2019 $ 501,000 September 30, 2019 $ 343,000 Dreamworld had $6,700,000 in 14% bonds outstanding through both years. What was the final cost of Dreamworld's warehouse?
XYZ Corp began construction on a building on January 1, 2016. On that date, it made...
XYZ Corp began construction on a building on January 1, 2016. On that date, it made its first $500,000 payment. An additional $600,000 were paid on 4/1/2016 and $300,000 was paid on 7/1/2016. A final payment of $100,000 was made on 12/31/2016, which is also the date when the construction project was finished and the building was ready to use. To finance the project, XYZ Corp issued a $800,000 10% note. Furthermore, XYZ Corp had a $2,000,000 5% note outstanding...
Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use...
Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2017. Harrisburg expected to complete the building by December 31, 2017. Harrisburg has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2016 $2,000,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2018 1,400,000 Long-term loan-11% interest, payable on January 1 of...
On January 1, 2018, the Marjlee Company began construction of an office building to be used...
On January 1, 2018, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2019. Construction expenditures for 2018, which were incurred evenly throughout the year, totaled $6,000,000. Marjlee had the following debt obligations which were outstanding during all of 2018: Construction loan, 14% $ 1,500,000 Long-term note, 13% 2,000,000 Long-term note, 10% 4,000,000 Required: Calculate the amount of interest capitalized in 2018 for the building using the...
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used...
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. Expenditures on the project were as follows:   January 1, 2016 $ 1,000,000   March 1, 2016 800,000   June 30, 2016 1,500,000   October 1, 2016 1,000,000   January 31, 2017 300,000   April 30, 2017 600,000   August 31, 2017 900,000 On January 1, 2016, the company obtained a $8.000,000 construction loan with a 12% interest rate....
On January 1, 2018, ABC Company began construction of a building to be used as its...
On January 1, 2018, ABC Company began construction of a building to be used as its warehouse. The building was completed on November 1, 2019. Expenditures for the project during 2018 were as follows: January 1, 2018 900,000 April 1, 2018 700,000 July 1, 2018 650,000 October 1, 2018 840,000 On January 1, 2018, ABC Company obtained a $4,000,000 construction loan with 9% interest rate payable in 5 years. The Company’s other debts included a note of $1,000,000 at 11%...