Problem 1 - Acme, Inc., a subsidiary of J & J, during 2015, began and completed a small warehouse. Construction on the warehouse began January 2, of 2015. Expenditures were made as follows: January 2, $1,000,000, March 1, $900,000, July 1, $400,000 and Oct. 1, $800,000. J & J financed the project by issuing $1,000,000 in stock at the beginning of 2015 and borrowed $1,200,000 from The Last National Bank at an interest rate of 8%. In addition, Acme had the following debt: $1,000,000, interest rate of 9% borrowed in 2010, $2,000,000, 10% note borrowed in 2012.
Requirements:
a. Calculate the 2015 weighted average accumulated expenditures
b. How much is avoidable interest
c. How much is actual interest
d. Make the entry capitalizing the interest.
Problem 2 - What changes has FASB made that effects property, plant and equipment, if any? Using a short paragraph, discuss the potential effect on the balance sheet and income statement.