Answer to Question #207363 in Accounting for Kkkk

Question

On January 1,2020, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30,2021. Expenditures on the project were as follows:

January 1,2020 200,000

September 1,2020 300,000

December 31,2020 300,000

March 31,2021 300,000

September 30,2021 200,000

Kendall borrowed ₱750,000 on a construction loan at 12% interest on January 1,2020. This loan was outstanding throughout the construction period. The company had ₱4,500,000 in 9% bonds payable outstanding in 2020 and 2021.

Questions:

Based on the above data, answer the following:

1. Average accumulated expenditures for 2020 was

2. Interest capitalized for 2020 was

3. Average accumulated expenditures for 2021 was

Interest capitalized for 2021 was

Answer 1

Solution:

1.). Average accumulated expenditures for 2020 was ₱300,000

Average accumulated expenditures for 2020 = $(200,000\times \frac{12}{12}) + (300,000\times \frac{4}{12}) + (300,000\times \frac{0}{12})$

= $200,000 + $100,000 + 0

= ₱300,000

2.). Interest capitalized for 2020 was ₱36,000

=$(300,000\times 12\%) = 36,000$

Interest capitalized for 2020=  ₱36,000

3.). 1.). Average accumulated expenditures for 2021 was ₱1,036,000

January to September = 800,000 + 36,000 = 836,000

Average accumulated expenditures for 2021 =

$(836,000\times \frac{9}{9}) + (300,000\times \frac{6}{9}) + (300,000\times \frac{0}{9})$

= 836,000 + 200,000 + 0

= ₱1,036,000

 

4.). Interest capitalized for 2021 was ₱86,805

= $(750,000\times 12\%\times \frac{9}{12}) = 67,500$

= $(1,036,000 - 750,000)\times 9\%\times \frac{9}{12}) = 19,305$

Total interest capitalized in 2021 = 67,500 + 19,305 = 86,805

Total interest capitalized in 2021 = ₱86,805