Question

Exercise 10-9 (Part Level Submission) On July 31, 2017, Pina Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Pina issued a $278,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $188,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Pina made a final $90,000 payment to Minsk. Other than the note to Netherlands, Pina’s only outstanding liability at December 31, 2017, is a $32,000, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.

Exercise 10-9 (Part Level Submission) On July 31, 2017, Pina Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Pina issued a $278,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each july 31 $188,400 of the proceeds ofthe note was paid to Misk on 〕uly 31. The remainder of the proceeds was temporarily invested in short-term marketable securities trading securities at 10% until November i On November i Pina made afinal $90 00 payment to Minsk. Other than the note to Netherlands Pina's only outstanding liability at December 31, 2017, is a $32.000 8%, 6 year note payable, dated January 1, 2014, on which interest is payable each December 31 ▼ (a) Your answer is correct. Calculate the interest revenue, weighted average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017 Interest revenue Weighted-average accumulated expenditures 2250 47100 Avoidable interest 5652 Interest capitalized 5652

Please make the entries clear and bold. Thank you so much for your help!

Answer 1

Answer:

b)General Journal
Date	Description	Debit	Credit
2017
01-Jul	Cash	$278,400
	12% Notes Payable		$278,400
	(To record the note)
	Factory Machinery	$188,400
	Short Term Investment	$90,000
	Cash		$278,400
	(To record the payment to Minsk)
01-Nov	Cash	$92,225
	Short Term Investment		$90,000
	Interest Revenue (Given Ans a))		$2,225
	(To record proceeds from the investment)
	Factory Machinery	$90,000
	Cash		$90,000
	(To record the payment to Minsk)
31-Dec	Factory Machinery ($47,100*12%)	$5,652
	Interest Expenses	$10,828
	Cash		$2,560
	Interest Payable		$13,920
	( To Record The Interest Exp and Capitalisation)

Interest revenue (278,400-188,400)*10%*3/12 $2,250

calculation of weighted average accumulated expenditure
date	expenditure	capitalisation period	weight	weighted expenditure
	a	b	c=b/12	a*c
Jul-31	1,88,400	3	0.25	47,100
Nov-01	90,000	0	-	-
	2,78,400			47,100

avoidable interest

47,100*12%

$5,652

Interest capitalised

$5,652

Working Note

Inerest Exps=(278400*12)*5/12)+($32,000*8%)

=$13,920+$2,560

=$16,480

Actual Interest Exps=$16,480-$5,652

=$10,828