Total amount of interest cost to be capitalized during 2020

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Reference no: EM133334023

Problem: 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 $2,000,000 August 31, 2020 3,000,000 December 31, 2020 2,500,000 In order to help finance the construction, Dobbs issued the following during 2020:

1) $1,700,000 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 2017 was a $425,000, 12% note payable dated January 1, 2016 and due January 1, 2023, with interest payable annually on January

1. Instructions Compute the amounts of each of the following (show computations):

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

Reference no: EM133334023

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