Hi Problem 107 Part Level Submission Blue Inc is a book dist

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Problem 10-7 (Part Level Submission) Blue Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Blue since 2012. Blue original facility became obsolete by early 2017 because of the increased sales volume and the fact that Blue now carries CDs in addition to books. On June 1, 2017, Blue contracted with Black Construction to have a new building constructed for $5,120,000 on land owned by Blue. The payments made by Blue to Black Construction are shown in the schedule below. Date July 30, 2017 lanuary 30, 2018 May 30, 2018 $1,152,000 1,920,000 2,048,000 $5,120,000 Total payments Construction was completed and the building was ready for occupancy on May 27, 2018. Blue had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2018, the end of its fiscal year 10%, 5-year note payable of $2,560,000, dated April 1, 2014, with interest payable annually on April 1. 12%, 10-year bond issue of S3-840,000 sold at par on June 30, 2010, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material Compute the weighted average accumulated expenditures on Blue\'s new building during the capitalization period Weighted-Average Accumulated Expenditures Click if you would like to Show Work for this question: Qp

Solution

Calculate Weighted-Average Accumulated Expenditures Weighted average accumulated expenditures on the new Building during the capitalization period should be computed as follows Expenditures Date Amount X Capitalization Period = Weighted Average Accumulated Expenditures 30-Jul-17 1,152,000 10/12 $960,000 30-Jan-18 1,920,000 04/12 $640,000 30-May-18 2,048,000 0 0 Total $5,120,000 $1,600,000