Reference no: EM132550177
Question - Early in 2010, Maley Corporation engaged Reese, Inc. to design and construct a complete modernization of Maley's manufacturing facility. Construction was begun on June 1, 2010 and was completed on December 31, 2010. Maley made the following payments to Reese, Inc. during 2010:
Date Payment
June 1, 2010 $3,600,000
August 31, 2010 5,400,000
December 31, 2010 4,500,000
In order to help finance the construction, Maley issued the following during 2010:
1. $3,200,000 of 10-year, 9% bonds payable, issued at par on May 31, 2010, 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, 2010.
In addition to the 9% bonds payable, the only debt outstanding during 2010 was a $750,000, 12% note payable dated January 1, 2006 and due January 1, 2013, with interest payable annually on January 1.
Instructions - Compute the amounts of each of the following (show computations) BE CAREFUL OF DATES:
1. Weighted-average accumulated expenditures qualifying for capitalization of interest cost.
2. Avoidable interest incurred during 2010.
3. Total amount of interest cost to be capitalized during 2010.
4. Make all necessary journal entries required for this question.