Ch10 14th Edition

Intermediate
Accounting
Prepared by
Coby Harmon
University of California, Santa Barbara
10-1
Acquisition and Disposition
10 of Property, Plant,
and Equipment
Intermediate Accounting
14th Edition
Kieso, Weygandt, and Warfield

10-2
Learning
Learning Objectives
Objectives
1. Describe property, plant, and equipment.

2. Identify the costs to include in initial valuation of property, plant, and
equipment.
3. Describe the accounting problems associated with self-constructed
assets.
4. Describe the accounting problems associated with interest
capitalization.
5. Understand accounting issues related to acquiring and valuing plant
assets.
6. Describe the accounting treatment for costs subsequent to acquisition.
7. Describe the accounting treatment for the disposal of property, plant,
and equipment.
10-3
Acquisition
Acquisition and
and Disposition
Disposition of
of
Property,
Property, Plant,
Plant, and
and Equipment
Equipment
Cost Subsequent
Acquisition Valuation Dispositions
to Acquisition
Acquisition Cash discounts Additions Sale

costs: land, Deferred Improvements Involuntary
buildings, contracts and conversion
equipment replacements
Lump-sum Miscellaneous
Self-constructed purchases Rearrangement problems
assets and reinstallation
Stock issuance
Interest costs Repairs
Nonmonetary
Observations exchanges Summary
Contributions
Other valuation
methods
10-4
Property,
Property, Plant,
Plant, and
and Equipment
Equipment
Property, plant, and equipment are assets of a durable

nature. Other terms commonly used are plant assets and
fixed assets.
Includes:
► “Used in operations” and not for
 Land,
resale.
 Building structures
► Long-term in nature and usually (offices, factories,
warehouses), and
depreciated.
 Equipment
► Possess physical substance. (machinery, furniture,
tools).
10-5 LO 1 Describe property, plant, and equipment.

Acquisition
Acquisition of
of PP&E
PP&E
Historical cost measures the cash or cash equivalent price

of obtaining the asset and bringing it to the location and
condition necessary for its intended use.
Main reasons for historical cost valuation:
 Historical cost is reliable.
 Companies should not anticipate gains and losses but

should recognize gains and losses only when the asset
is sold.
LO 2 Identify the costs to include in initial valuation of

10-6
property, plant, and equipment.
Acquisition
Acquisition of
of PP&E
PP&E
Cost of Land
Includes all costs to acquire land and ready it for use. Costs
typically include:
(1) purchase price;
(2) closing costs, such as title to the land, attorney’s fees, and
recording fees;
(3) costs of grading, filling, draining, and clearing;
(4) assumption of any liens, mortgages, or encumbrances on
the property; and
(5) additional land improvements that have an indefinite life.
10-7 LO 2
Acquisition
Acquisition of
of PP&E
PP&E
Cost of Land
Improvements with limited lives, such as private
driveways, walks, fences, and parking lots, are recorded as
Land Improvements and depreciated.
 Land acquired and held for speculation is classified

as an investment.
 Land held by a real estate concern for resale should

be classified as inventory.

10-8
Acquisition
Acquisition of
of PP&E
PP&E
Cost of Buildings
Includes all costs related directly to acquisition or
construction. Cost typically include:
 materials, labor, and overhead costs incurred during

construction and
 professional fees and building permits.

10-9
Acquisition
Acquisition of
of PP&E
PP&E
Cost of Equipment
Include all costs incurred in acquiring the equipment and
preparing it for use. Costs typically include:
1) purchase price,
2) freight and handling charges,
3) insurance on the equipment while in transit,
4) cost of special foundations if required,
5) assembling and installation costs, and
6) costs of conducting trial runs.
10-10 LO 2
 Purchase price
Import duties
Non-refundable purchase taxes
LESS
Trade discounts
10-11
 Directly attributable costs
Site preparation
Delivery cost
installation cost
Testing
Professional fees
10-12
Acquisition
Acquisition of
of PP&E
PP&E
E10-1 (variation): The expenditures and receipts below are related to
land, land improvements, and buildings acquired for use in a business
enterprise. Determine how the following should be classified:
(a) Money borrowed to pay building contractor Notes Payable

(b) Payment for construction from note proceeds Building
(c) Cost of land fill and clearing Land
(d) Delinquent real estate taxes on property Land
assumed
(e) Premium on 6-month insurance policy during Building
construction
(f) Refund of 1-month insurance premium because (Building)
construction completed early
10-13 LO 2
Acquisition
Acquisition of
of PP&E
PP&E
E10-1 (variation): The expenditures and receipts below are related to
land, land improvements, and buildings acquired for use in a business
enterprise. Determine how the following should be classified:
(g) Architect’s fee on building Building

(h) Cost of real estate purchased as a plant site Land
(land $200,000 and building $50,000)
(i) Commission fee paid to real estate agency Land
(j) Installation of fences around property Land Improvements
(k) Cost of razing and removing building Land
(l) Proceeds from salvage of demolished building (Land)
(m) Cost of parking lots and driveways Land Improvements
(n) Cost of trees and shrubbery (permanent) Land

10-14 LO 2
Acquisition
Acquisition of
of PP&E
PP&E
Self-Constructed Assets
Costs typically include:
(1) Materials and direct labor
(2) Overhead can be handled in two ways:
1. Assign no fixed overhead
2. Assign a portion of all overhead to the construction

process.
Companies use the second method extensively.
10-15 LO 3 Describe the accounting problems associated with self-constructed assets.

Acquisition
Acquisition of
of PP&E
PP&E
Interest Costs During Construction

Three approaches have been suggested to account for the
interest incurred in financing the construction.
Illustration 10-1
$0
Increase to Cost of Asset $?
Capitalize no Capitalize
interest during Capitalize actual
all costs of
construction costs incurred during
funds
construction
GAAP
10-16 LO 4 Describe the accounting problems associated with interest capitalization.

Acquisition
Acquisition of
of PP&E
PP&E
Interest Costs During Construction

 GAAP requires — capitalizing actual interest (with
modification).
 Consistent with historical cost.
 Capitalization considers three items:
1. Qualifying assets.
2. Capitalization period.
3. Amount to capitalize.

Acquisition
Acquisition of
of PP&E
PP&E
Qualifying Assets
Require a substantial period of time to get them ready for
their intended use.
Two types of assets:
 Assets under construction for a company’s own use.
 Assets intended for sale or lease that are constructed

or produced as discrete projects.

Acquisition
Acquisition of
of PP&E
PP&E
Capitalization Period
Begins when:
1. Expenditures for the asset have been made.
2. Activities for readying the asset are in progress .
3. Interest costs are being incurred.
Ends when:
The asset is substantially complete and ready for use.

Acquisition
Acquisition of
of PP&E
PP&E
Amount to Capitalize
Capitalize the lesser of:
1. Actual interest costs
2. Avoidable interest - the amount of interest that could

have been avoided if expenditures for the asset had
not been made.

Acquisition
Acquisition of
of PP&E
PP&E
Interest Capitalization Illustration: Blue Corporation borrowed
$200,000 at 12% interest from State Bank on Jan. 1, 2011, for specific
purposes of constructing special-purpose equipment to be used in its
operations. Construction on the equipment began on Jan. 1, 2011, and
the following expenditures were made prior to the project’s completion on
Dec. 31, 2011:
Other general debt existing on
Actual Expenditures: Jan. 1, 2011:
January 1, 2011 $100,000
April 30, 2011 150,000 $500,000, 14%, 10-year
bonds payable
November 1, 2011 300,000
December 31, 2011 100,000
$300,000, 10%, 5-year
Total expenditures $650,000 note payable

Acquisition
Acquisition of
of PP&E
PP&E
Step 1 - Determine which assets qualify for capitalization of

interest.
Special purpose equipment qualifies because it requires a
period of time to get ready and it will be used in the company’s
operations.
Step 2 - Determine the capitalization period.

The capitalization period is from Jan. 1, 2011 through Dec. 31,
2011, because expenditures are being made and interest
costs are being incurred during this period while construction
is taking place.

Acquisition
Acquisition of
of PP&E
PP&E
Step 3 - Compute weighted-average accumulated

expenditures. Weighted
Average
Actual Capitalization Accumulated
Date Expenditures Period Expenditures
Jan. 1 $ 100,000 12/12 $ 100,000
Apr. 30 150,000 8/12 100,000
Nov. 1 300,000 2/12 50,000
Dec. 31 100,000 0/12 -
$ 650,000 $ 250,000
A company weights the construction expenditures by the amount of time

(fraction of a year or accounting period) that it can incur interest cost on the
expenditure.

Acquisition
Acquisition of
of PP&E
PP&E
Step 4 - Compute the Actual and Avoidable Interest.
Selecting Appropriate Interest Rate:
1. For the portion of weighted-average accumulated expenditures

that is less than or equal to any amounts borrowed specifically to
finance construction of the assets, use the interest rate
incurred on the specific borrowings.
2. For the portion of weighted-average accumulated expenditures

that is greater than any debt incurred specifically to finance
construction of the assets, use a weighted average of interest
rates incurred on all other outstanding debt during the
period.

Acquisition
Acquisition of
of PP&E
PP&E
Step 4 - Compute the Actual and Avoidable Interest.
Actual Interest Interest Actual
Debt Rate Interest Weighted-average
Specific Debt $ 200,000 12% $ 24,000 interest rate on
general debt
General Debt 500,000 14% 70,000 $100,000 = 12.5%
300,000 10% 30,000 $800,000
$ 1,000,000 $ 124,000
Accumulated Interest Avoidable

Avoidable Interest Expenditures Rate Interest
$ 200,000 12% $ 24,000
50,000 12.5% 6,250
$ 250,000 $ 30,250

Acquisition
Acquisition of
of PP&E
PP&E
Step 5 – Capitalize the lesser of Avoidable interest or

Actual interest.
Avoidable interest $ 30,250

Actual interest 124,000
Journal entry to Capitalize Interest:
Equipment 30,250
Interest expense
30,250

Acquisition
Acquisition of
of PP&E
PP&E
Comprehensive Illustration: On November 1, 2011, Shalla

Company contracted Pfeifer Construction Co. to construct a
building for $1,400,000 on land costing $100,000 (purchased
from the contractor and included in the first payment). Shalla
made the following payments to the construction company during
2012.

Acquisition
Acquisition of
of PP&E
PP&E
Pfeifer Construction completed the building, ready for occupancy,
on December 31, 2012. Shalla had the following debt outstanding
at December 31, 2012.
Specific Construction Debt
1. 15%, 3-year note to finance purchase of land and
construction of the building, dated December 31, 2011, with
interest payable annually on December 31 $750,000
Other Debt
2. 10%, 5-year note payable, dated December 31, 2008, with
3. 12%, 10-year bonds issued December 31, 2007, with
Compute weighted-average accumulated expenditures for 2012.

Acquisition
Acquisition of
of PP&E
PP&E
Compute weighted-average accumulated expenditures for 2012.

Illustration 10-4

Acquisition
Acquisition of
of PP&E
PP&E
Compute the avoidable interest.

Illustration 10-5

Acquisition
Acquisition of
of PP&E
PP&E
Compute the actual interest cost, which represents the maximum

amount of interest that it may capitalize during 2011.
Illustration 10-6
The interest cost that Shalla capitalizes is the lesser of $120,228

(avoidable interest) and $239,500 (actual interest), or $120,228.

Acquisition
Acquisition of
of PP&E
PP&E
Shalla records the following journal entries during 2012:
January 1 Land 100,000

Buildings (or CIP) 110,000
Cash 210,000
March 1 Buildings 300,000

Cash 300,000
May 1 Buildings 540,000

Cash 540,000
December 31 Buildings 450,000

Cash 450,000
Buildings (Capitalized Interest) 120,228
Interest Expense 119,272
Cash 239,500

Acquisition
Acquisition of
of PP&E
PP&E
At December 31, 2012, Shalla discloses the amount of interest

capitalized either as part of the income statement or in the notes
accompanying the financial statements.
Illustration 10-7
Illustration 10-8

Acquisition
Acquisition of
of PP&E
PP&E
Special Issues Related to Interest Capitalization
1. Expenditures for land.
 Interest costs capitalized are part of the cost of the

plant, not the land.
2. Interest revenue.
 Interest revenue should be offset against interest

cost when determining the amount of interest to
capitalized.

Valuation
Valuation of
of PP&E
PP&E
Companies should record property, plant, and equipment:
 at the fair value of what they give up or
 at the fair value of the asset received,
whichever is more clearly evident.
10-35 LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Valuation
Valuation of
of PP&E
PP&E
Cash Discounts — Discount for prompt payment.
Deferred-Payment Contracts — Assets, purchased through

long term credit, are recorded at the present value of the
consideration exchanged.
Lump-Sum Purchases — Allocate the total cost among the

various assets on the basis of their fair market values.
Issuance of Stock — The market value of the stock issued is

a fair indication of the cost of the property acquired.
Valuation
Valuation of
of PP&E
PP&E
Exchanges of Nonmonetary Assets

Ordinarily accounted for on the basis of:
 the fair value of the asset given up or
 the fair value of the asset received,
whichever is clearly more evident.
Companies should recognize immediately any gains or losses

on the exchange when the transaction has commercial
substance.
Valuation
Valuation of
of PP&E
PP&E
Meaning of Commercial Substance

Exchange has commercial substance if the future cash flows
change as a result of the transaction. That is, if the two parties’
economic positions change, the transaction has commercial
substance.
Illustration 10-10
* If cash is 25%
or more of the
fair value of the
exchange,
recognize entire
gain because
earnings
process is
complete.
Valuation
Valuation of
of PP&E
PP&E
Exchanges - Loss Situation

Companies recognize a loss immediately whether the exchange
has commercial substance or not.
Rationale: Companies should not value assets at more than their

cash equivalent price; if the loss were deferred, assets would be
overstated.
Valuation
Valuation of
of PP&E
PP&E
Illustration: Information Processing, Inc. trades its used machine for a

new model at Jerrod Business Solutions Inc. The exchange has
commercial substance. The used machine has a book value of $8,000
(original cost $12,000 less $4,000 accumulated depreciation) and a fair
value of $6,000. The new model lists for $16,000. Jerrod gives
Information Processing a trade-in allowance of $9,000 for the used
machine. Information Processing computes the cost of the new asset
as follows.
Illustration 10-11
Valuation
Valuation of
of PP&E
PP&E
Illustration: Information Processing records this transaction as

follows:
Equipment 13,000
Accumulated Depreciation—Equipment 4,000
Loss on Disposal of Equipment 2,000
Equipment
12,000
Cash
Illustration 10-12
Loss on 7,000
Disposal
Valuation
Valuation of
of PP&E
PP&E
Exchanges - Gain Situation

Has Commercial Substance. Company usually records the
cost of a nonmonetary asset acquired in exchange for
another nonmonetary asset at the fair value of the asset
given up, and immediately recognizes a gain.
Valuation
Valuation of
of PP&E
PP&E
Illustration: Interstate Transportation Company exchanged a

number of used trucks plus cash for a semi-truck. The used trucks
have a combined book value of $42,000 (cost $64,000 less $22,000
accumulated depreciation). Interstate’s purchasing agent,
experienced in the second-hand market, indicates that the used
trucks have a fair market value of $49,000. In addition to the trucks,
Interstate must pay $11,000 cash for the semi-truck. Interstate
computes the cost of the semi-truck as follows.
Illustration 10-13
Valuation
Valuation of
of PP&E
PP&E
Illustration: Interstate records the exchange transaction as follows:
Semi-truck 60,000
Accumulated Depreciation—Trucks 22,000
Trucks (used)
64,000
Gain on disposal of Used Trucks
7,000
Cash Illustration 10-14
Gain on 11,000
Disposal
Valuation
Valuation of
of PP&E
PP&E

Lacks Commercial Substance—No Cash Received. Now
assume that Interstate Transportation Company exchange
lacks commercial substance. That is, the economic position
of Interstate did not change significantly as a result of this
exchange. In this case, Interstate defers the gain of $7,000
and reduces the basis of the semi-truck.
Valuation
Valuation of
of PP&E
PP&E
Illustration: Interstate records the exchange transaction as

follows:
Trucks (semi) 53,000

Accumulated Depreciation—Trucks 22,000
Trucks (used)
64,000
Cash
Illustration 10-15
11,000
Valuation
Valuation of
of PP&E
PP&E

Lacks Commercial Substance—Some Cash Received.
When a company receives cash (sometimes referred to as
“boot”) in an exchange that lacks commercial substance, it
may immediately recognize a portion of the gain. The
general formula for gain recognition when an exchange
includes some cash is as follows:
Illustration 10-16
Valuation
Valuation of
of PP&E
PP&E
Illustration: Queenan Corporation traded in used machinery

with a book value of $60,000 (cost $110,000 less accumulated
depreciation $50,000) and a fair value of $100,000. It receives in
exchange a machine with a fair value of $90,000 plus cash of
$10,000.
Illustration 10-17
Valuation
Valuation of
of PP&E
PP&E
The portion of the gain a company recognizes is the ratio of

monetary assets (cash in this case) to the total consideration
received.
Illustration 10-18
Valuation
Valuation of
of PP&E
PP&E
Queenan would record the following entry.

Illustration 10-19
Cash 10,000
Machine 54,000
Accumulated Depreciation—Machine 50,000
Machine
110,000
Gain on disposal of machine
4,000
Valuation
Valuation of
of PP&E
PP&E
Summary of Gain and Loss Recognition
on Exchanges of Non-Monetary Assets
Illustration 10-20
Valuation
Valuation of
of PP&E
PP&E
E10-19: Santana Company exchanged equipment used in its

manufacturing operations plus $2,000 in cash for similar equipment
used in the operations of Delaware Company. The following
information pertains to the exchange.
Santana Delaware
Equipment (cost) $28,000 $28,000
Accumulated Depreciation 19,000 10,000
Fair value of equipment 13,500 15,500
Cash given up 2,000
Instructions: Prepare the journal entries to record the exchange on

the books of both companies.
Valuation
Valuation of
of PP&E
PP&E
Calculation of Gain or Loss

Santana Delaware
Fair value of equipment received $15,500 $13,500
Cash received / paid (2,000) 2,000
Less: Book value of equipment
($28,000-19,000) (9,000)
($28,000-10,000) (18,000)
Gain or (Loss) on Exchange $4,500 ($2,500)
Valuation
Valuation of
of PP&E
PP&E
Has Commercial Substance
Santana:
Equipment 15,500
Accumulated depreciation 19,000
Cash
2,000
Equipment
28,000
Gain on exchange
Delaware:
Cash 4,500
2,000
Equipment 13,500
Loss on exchange 2,500
Equipment
28,000
Valuation
Valuation of
of PP&E
PP&E
Santana (Has Commercial Substance):

Equipment 15,500
Cash
2,000
Equipment
28,000
Gain on disposal of equipment
4,500
Santana (LACKS Commercial Substance):
Equipment (15,500 – 4,500) 11,000
Cash
2,000
Equipment
28,000
Valuation
Valuation of
of PP&E
PP&E
Delaware (Has Commercial Substance):

Cash 2,000
Equipment 13,500
Loss on disposal of equipment 2,500
Equipment
28,000
Delaware (LACKS Commercial Substance):

Cash 2,000
Equipment 13,500
Loss on disposal of equipment 2,500
Equipment
28,000
Valuation
Valuation of
of PP&E
PP&E
Accounting for Contributions

Companies should use:
 the fair value of the asset to establish its value on the
books and
 should recognize contributions received as revenues
in the period received.
Valuation
Valuation of
of PP&E
PP&E
Contributions
When a company contributes a non-monetary asset, it should
record the amount of the donation as an expense at the fair
value of the donated asset.
Illustration: Kline Industries donates land to the city of Los

Angeles for a city park. The land cost $80,000 and has a fair
value of $110,000. Kline Industries records this donation as
follows.
Contribution Expense 110,000

Land 80,000
Gain on Disposal of Land 30,000
10-58 LO 5
Costs
Costs Subsequent
Subsequent to
to Acquisition
Acquisition
Recognize costs subsequent to acquisition as an asset

when the costs can be
 measured reliably and
 it is probable that the company will obtain future
economic benefits.
Future economic benefit would include increases in

1. useful life,
2. quantity of product produced, and
3. quality of product produced.
10-59 LO 6 Describe the accounting treatment for costs subsequent to acquisition.

Costs
Costs Subsequent
Subsequent to
to Acquisition
Acquisition
10-60 LO 6
Costs
Costs Subsequent
Subsequent to
to Acquisition
Acquisition
Summary Illustration 10-21
10-61 LO 6 Describe the accounting treatment for costs subsequent to acquisition.

Disposition
Disposition of
of PP&E
PP&E
A company may retire plant assets voluntarily or dispose of

them by
 Sale.
 involuntary conversion.
Depreciation must be taken up to the date of disposition.
LO 7 Describe the accounting treatment for the

10-62
disposal of property, plant, and equipment.
Disposition
Disposition of
of PP&E
PP&E
Sale of Plant Assets

BE10-14: Ottawa Corporation owns machinery that cost $20,000
when purchased on July 1, 2009. Depreciation has been recorded
at a rate of $2,400 per year, resulting in a balance in accumulated
depreciation of $8,400 at December 31, 2012. The machinery is
sold on September 1, 2013, for $10,500.
Prepare journal entries to
a) update depreciation for 2013 and
b) record the sale.

10-63
Disposition
Disposition of
of PP&E
PP&E
a) Depreciation for 2013
Depreciation expense ($2,400 x 8/12) 1,600

Accumulated depreciation
1,600
b) Record the sale
Cash 10,500
*
Machinery
20,000
Gain on sale
* $8,400 + $1,600 = $10,000 500 for the
LO 7 Describe the accounting treatment
10-64
Disposition
Disposition of
of PP&E
PP&E
Involuntary Conversion
Sometimes an asset’s service is terminated through some type
of involuntary conversion such as fire, flood, theft, or
condemnation.
Companies report the difference between the amount
recovered (e.g., from a condemnation award or insurance
recovery), if any, and the asset’s book value as a gain or loss.
They treat these gains or losses like any other type of
disposition.

10-65
Copyright
Copyright
Copyright © 2012 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
10-66

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Intermediate

Kieso, Weygandt, and Warfield

1. Describe property, plant, and equipment.

Acquisition Cash discounts Additions Sale

Property, plant, and equipment are assets of a durable

10-5 LO 1 Describe property, plant, and equipment.

Historical cost measures the cash or cash equivalent price

Main reasons for historical cost valuation:

 Historical cost is reliable.

 Companies should not anticipate gains and losses but

LO 2 Identify the costs to include in initial valuation of

 Land acquired and held for speculation is classified

 Land held by a real estate concern for resale should

LO 2 Identify the costs to include in initial valuation of

 materials, labor, and overhead costs incurred during

 professional fees and building permits.

LO 2 Identify the costs to include in initial valuation of

(a) Money borrowed to pay building contractor Notes Payable

(g) Architect’s fee on building Building

(n) Cost of trees and shrubbery (permanent) Land

(1) Materials and direct labor

(2) Overhead can be handled in two ways:

1. Assign no fixed overhead

2. Assign a portion of all overhead to the construction

Companies use the second method extensively.

10-15 LO 3 Describe the accounting problems associated with self-constructed assets.

Interest Costs During Construction

10-16 LO 4 Describe the accounting problems associated with interest capitalization.

Interest Costs During Construction

10-17 LO 4 Describe the accounting problems associated with interest capitalization.

Two types of assets:

 Assets under construction for a company’s own use.

 Assets intended for sale or lease that are constructed

10-18 LO 4 Describe the accounting problems associated with interest capitalization.

10-19 LO 4 Describe the accounting problems associated with interest capitalization.

1. Actual interest costs

2. Avoidable interest - the amount of interest that could

10-20 LO 4 Describe the accounting problems associated with interest capitalization.

10-21 LO 4 Describe the accounting problems associated with interest capitalization.

Step 1 - Determine which assets qualify for capitalization of

Step 2 - Determine the capitalization period.

10-22 LO 4 Describe the accounting problems associated with interest capitalization.

Step 3 - Compute weighted-average accumulated

A company weights the construction expenditures by the amount of time

10-23 LO 4 Describe the accounting problems associated with interest capitalization.

Step 4 - Compute the Actual and Avoidable Interest.

Selecting Appropriate Interest Rate:

1. For the portion of weighted-average accumulated expenditures

2. For the portion of weighted-average accumulated expenditures

10-24 LO 4 Describe the accounting problems associated with interest capitalization.

Accumulated Interest Avoidable

10-25 LO 4 Describe the accounting problems associated with interest capitalization.

Step 5 – Capitalize the lesser of Avoidable interest or

Avoidable interest $ 30,250

Journal entry to Capitalize Interest:

10-26 LO 4 Describe the accounting problems associated with interest capitalization.

Comprehensive Illustration: On November 1, 2011, Shalla

10-27 LO 4 Describe the accounting problems associated with interest capitalization.

Compute weighted-average accumulated expenditures for 2012.

10-28 LO 4 Describe the accounting problems associated with interest capitalization.