Reference no: EM132784479
Early in 2020, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2020 and was completed on December 31, 2020. Dobbs made the following payments to Kiner, Inc. during 2020:
Date Payment
June 1, 2020 $2,200,000
August 31, 2020 3,300,000
December 31, 2020 2,750,000
In order to help finance the construction, Dobbs issued the following during 2020:
1. $1,870,000 of 10-year, 9% bonds payable, issued at par on May 31, 2020, with interest payable annually on May 31.
2. 300,000 shares of no-par common stock, issued at $10 per share on October 1, 2020.
In addition to the 9% bonds payable, the only debt outstanding during 2020 was a $467,500, 12% note payable dated January 1, 2016 and due January 1, 2023, with interest payable annually on January 1.
problem 1: Compute the amounts of each of the following:
1. Weighted-average accumulated expenditures qualifying for capitalization of interest cost.
2. Avoidable interest incurred during 2020.
3. Total amount of interest cost to be capitalized during 2020.