On June 1, 2017, ABC Inc., contracted with NHL Co. to have a distribution center constructed for

Fantastic news! We've Found the answer you've been seeking!

Question:

On June 1, 2017, ABC Inc., contracted with NHL Co. to have a distribution center constructed for $6,800,000 on land owned by ABC. ABC made the following payments to NHL:

Date Amount

1-Jul-17 1,200,000

1-Jan-18 1,500,000

1-May-18 1,000,000

1-Jun-18 1,300,000

1-Jul-18 1,800,000

Total payments 6,800,000

When the contract was signed, construction was not expected to be completed until July 1, 2018. Financing of the construction came from two sources. First, ABC took out a one-year loan of $1,000,000 on July 1, 2017 at 7% per annum. Second, ABC had the following general corporate loans outstanding when the construction was in progress:

8%, 6-year note payable of $2,000,000, dated April 1, 2014, with interest payable annually on April 1 10.00%, 10-year bond issue of $3,000,000 sold at par on June 30, 2010, with interest payable annually on June 30

The company’s fiscal year end is June 30 and it follows IFRS.

A)-Calculate total weighted-average accumulated expenditures as of June 30, 2018

B)-Calculate total borrowing costs that ABC was required to capitalize for the building under IFRS as of June 30, 2018.

C)-Prepare journal entries that ABC would prepare on June 30, 2018 (end of year) to capitalize borrowing costs incurred as of that date for the building.