Capitalization of interest.
Early in 2014, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2014 and was completed on December 31, 2014. Dobbs made the following payments to Kiner, Inc. during 2014: In order to help finance the construction, Dobbs issued the following during 2014:"
1. $5,000,000 of 10-year, 9% bonds payable, issued at par on May 31, 2014, with interest payable annually on May 31.
2. 1,000,000 shares of no-par common stock, issued at $10 per share on October 1, 2014.In addition to the 9% bonds payable, the only debt outstanding during 2014 was a $1,250,000, 12% note payable dated January 1, 2010 and due January 1, 2020, with interest payable annually on January 1.

Instructions
Compute the amounts of each of the following (show computations):"
1. Weighted-average accumulated expenditures qualifying for capitalization of interest cost.
2. Avoidable interest incurred during 2014.
3. Total amount of interest cost to be capitalized during 2014.

Question

Capitalization of interest.
Early in 2014, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2014 and was completed on December 31, 2014. Dobbs made the following payments to Kiner, Inc. during 2014:  In order to help finance the construction, Dobbs issued the following during 2014:"
1. $5,000,000 of 10-year, 9% bonds payable, issued at par on May 31, 2014, with interest payable annually on May 31.
2. 1,000,000 shares of no-par common stock, issued at $10 per share on October 1, 2014.In addition to the 9% bonds payable, the only debt outstanding during 2014 was a $1,250,000, 12% note payable dated January 1, 2010 and due January 1, 2020, with interest payable annually on January 1.

Instructions
Compute the amounts of each of the following (show computations):"
1. Weighted-average accumulated expenditures qualifying for capitalization of interest cost.
2. Avoidable interest incurred during 2014.
3. Total amount of interest cost to be capitalized during 2014.

Quizplus · Accepted Answer

The Answer of Capitalization of interest.
Early in 2014, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2014 and was completed on December 31, 2014. Dobbs made the following payments to Kiner, Inc. during 2014:  In order to help finance the construction, Dobbs issued the following during 2014:"
1. $5,000,000 of 10-year, 9% bonds payable, issued at par on May 31, 2014, with interest payable annually on May 31.
2. 1,000,000 shares of no-par common stock, issued at $10 per share on October 1, 2014.In addition to the 9% bonds payable, the only debt outstanding during 2014 was a $1,250,000, 12% note payable dated January 1, 2010 and due January 1, 2020, with interest payable annually on January 1.

Instructions
Compute the amounts of each of the following (show computations):"
1. Weighted-average accumulated expenditures qualifying for capitalization of interest cost.
2. Avoidable interest incurred during 2014.
3. Total amount of interest cost to be capitalized during 2014.

Capitalization of Interest. Early in 2014, Dobbs Corporation Engaged Kiner, Inc. to Design