ABC Company entered into a contract with XYZ Company to construct a building for ABC.  The contract called for work to begin on January 1, Y1 and for ABC to make an initial payment of $100,000 at that time.  Another $200,000 was to be paid by ABC at the end of each three-month period until and including December 31, Y1 when the building was to be completed, transferred to ABC and placed into service.  All aspects of the contract were completed on schedule.  ABC Co. borrowed $300,000 on April 1, Y1 to help finance this project at an interest rate of 6%.  Throughout the construction period, ABC had $900,000 of additional long-term debt outstanding at an average interest rate of 7%.

 Required:

 What are WAAE for Year 1?

 How much interest will ABC capitalize related to this building?

 What is the building balance at 12/31/Y1?

 How much interest will ABC expense in Y1?

Answer rating: 100% (QA)

To calculate the WeightedAverage Accumulated Expenditures WAAE interest capitalized building balance ... View the full answer