Business, 18.04.2020 03:55 genyjoannerubiera

Purcell Corporation engaged Morse, Inc. to design and construct a complete modernization of Purcell's manufacturing facility. Construction was begun on January 1, 2019 and was completed on February 28, 2020. Purcell made the following payments to Morse, Inc. during the construction period: Date Payment June 1, 2019 $3,600,000 August 31, 2019 5,400,000 December 31, 2019 4,600,000 February 28, 2020 100,000 To help specifically to finance the construction, Purcell issued $3,200,000 of 10-year, 6% bonds payable at par on January 1, 2019, with interest payable annually starting January 1, 2020. In addition to the 6% bonds payable, the only debt outstanding during 2019 was a $12,000,000, 4% note payable dated January 1, 2015 and due January 1, 2025, with interest payable annually on January 1. For interest capitalization purposes, Purcell uses the specific interest method.

Required:

a. Calculate the following. Round all computations to the nearest dollar.

i. Interest revenue earned by Dobbs in 2016 (3 marks)
ii. Weighted-average accumulated expenditures (4 marks)
iii. Avoidable interest (3 marks) iv. Actual interest (7 marks)
iv. Total interest cost capitalized during 2016. (3 marks)

b. Prepare the December 31, 2016 journal entries needed on the books of Dobbs Corporation.

Answers: 3

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Purcell Corporation engaged Morse, Inc. to design and construct a complete modernization of Purcell'...

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