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Compute the amount of avoidable interest

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Question - During 2014, Allyson Scott Building Company constructed equipment (qualified) at a total cost of $9,000,000. The company made the payments to complete the project as follows: 1/1/14-$1,600,000, 3/1/14-1,800,00, 5/1/14-$2,100,000, 8/1/14-$2,400,000, 12/3/14-$1,100,000. The company had the following debt outstanding at December 31, 2014

1. 10%, 5-year note to finance construction of various assets, dated January 1, 2014, with interest payable annually on January 1 $4,500,000

2. 12%, ten-year bonds issued at par on December 31, 2008, with interest payable annually on December 31 5,000,000

3. 9%, 3-year note payable, dated January 1, 2011, with interest payable annually on January 1 2,500,000

Compute the amount of each of the following (Show computations)

1. Weight average accumulated expenditures.

2. Avoidable interest

3. Total interest to be capitalized during 2014

4. Journal entry to capitalize the interest. Assume all interest expense for the year had already paid or accured.

Reference no: EM131986995

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