Solution-Compute the weighted average accumulated

Compute the weighted average accumulated expenditure

Reference no: EM132781900

Question - On June 1, 2019, Silver Company entered into a contract with Jaya Construction for to build a new $ 4,000,000 building on land owned by the Silver Company. Payment carried out by Silver Company to Jaya Construction are as follows:

Date Amount

July 30, 2019 $900,000

January 30, 2020 $1,500,000

30 May 2020 $1,600,000

Total $4,000,000

Construction is complete & the new building is ready for occupancy on March 27, 2020. Silver Company is not has a new borrowing specifically intended to build a new building.But Silver Company has outstanding debt as of May 31, 2020, namely:

a. 10%, 5 year note payable, $ 2,000,000, dated April 1, 2016, interest payable annually on April 1st.

b. A 12%, 10% bond issue, $ 3,000,000 sold at face value on June 30, 2012, with interest payable annually on June 30.

Required -

1. Compute the weighted average accumulated expenditure for the new Silver Company building during the capitalization period.

2. Calculate the avoidable interest for the new building Silver Company.

3. Calculate the total actual interest cost and the interest that will be recognized as interest expense.

Reference no: EM132781900

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Compute the weighted average accumulated expenditure

Reference no: EM132781900

Reference no: EM132781900

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