Question

On January 1, 2019, Jameel Company engaged Galadari Engineering Company to construct

              a special purpose machinery.Construction began immediately and completed on October 1 ,2019.

              To help finance construction , on January 1, 2019 Otaibi issued a $500,000, 3 year 12% note payable

               at Emirates Bank on which interest is payable every December 31. $375,000 of the proceeds of the

               note was paid to Galadari on January 1, 2019.The reminder of the proceeds was temporarily   

              invested in short- term marketable securities (trading securities) at 10% until October 1.

              On October1, Jameel made a final $125,000 payment to Galadari. Other than the note to Emirates

              Bank, Jameel’s only outstanding liability on December 31, 2019 is a 40,000 ,8% 6 year note-

               -payable,dated January 1, 2016 on which interest is payble each December 31.

              Required:

1. Calculate the interest revenue, weighted -average accumulated expenditures, avoidable interest        and total interest cost to be capitalized during 2019. (round all computations to the nearest dollar).
2. Prepare journal entrres needed on the books of Jameel Company at each of the following dates.

1. January 1, 2019
2. October 1, 2019
3. December 31, 2019

Answer 1