Maple View, Inc. signed a contract for the construction of their new headquarters building on January 1, 2019, with a total construction cost of $2,000,000. Work on the construction began on that date, and the building was completed on December 31, 2019. Maple View paid the contractor a total of $500,000 as the down payment on the project on January 1, 2019. To help finance the project, the company signed a five-year construction loan note with the local bank, in the amount of $800,000, which carried an annual interest rate of 6%. In addition to the construction loan, Maple View had two other liabilities, as follows: In addition to the down payment, Maple View paid the contractor the following: March 1, 2019 September 1, 2019 December 1, 2019 REQUIRED: A) Long-Term Note Payable, beginning in 2017, $400,000 face value, 5% annual interest. Bonds Payable, beginning in 2018, $600,000 face value, 8% annual interest. B) C) $600,000 $800,000 $100,000 Calculate the weighted-average accumulated expenditures for Maple View to use in determining the amount of avoidable interest for 2019. Calculate the amount of avoidable interest for 2019. Calculate the correct amount of interest expense to be reported on Maple View's income statement for 2019.
Maple View, Inc. signed a contract for the construction of their new headquarters building on January 1, 2019, with a total construction cost of $2,000,000. Work on the construction began on that date, and the building was completed on December 31, 2019. Maple View paid the contractor a total of $500,000 as the down payment on the project on January 1, 2019. To help finance the project, the company signed a five-year construction loan note with the local bank, in the amount of $800,000, which carried an annual interest rate of 6%. In addition to the construction loan, Maple View had two other liabilities, as follows: In addition to the down payment, Maple View paid the contractor the following: March 1, 2019 September 1, 2019 December 1, 2019 REQUIRED: A) Long-Term Note Payable, beginning in 2017, $400,000 face value, 5% annual interest. Bonds Payable, beginning in 2018, $600,000 face value, 8% annual interest. B) C) $600,000 $800,000 $100,000 Calculate the weighted-average accumulated expenditures for Maple View to use in determining the amount of avoidable interest for 2019. Calculate the amount of avoidable interest for 2019. Calculate the correct amount of interest expense to be reported on Maple View's income statement for 2019.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 6P
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Transcribed Image Text:Maple View, Inc. signed a contract for the construction of their new headquarters building on January
1, 2019, with a total construction cost of $2,000,000. Work on the construction began on that date, and
the building was completed on December 31, 2019. Maple View paid the contractor a total of $500,000
as the down payment on the project on January 1, 2019. To help finance the project, the company
signed a five-year construction loan note with the local bank, in the amount of $800,000, which carried
an annual interest rate of 6%.
In addition to the construction loan, Maple View had two other liabilities, as follows:
In addition to the down payment, Maple View paid the contractor the following:
March 1, 2019
September 1, 2019
December 1, 2019
REQUIRED:
A)
Long-Term Note Payable, beginning in 2017, $400,000 face value, 5% annual interest.
Bonds Payable, beginning in 2018, $600,000 face value, 8% annual interest.
B)
C)
$600,000
$800,000
$100,000
Calculate the weighted-average accumulated expenditures for Maple View to use in
determining the amount of avoidable interest for 2019.
Calculate the amount of avoidable interest for 2019.
Calculate the correct amount of interest expense to be reported on Maple View's income
statement for 2019.
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