Reference no: EM13573283

On July 31, 2012, Bismarck Company engaged Duval Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2012. To help finance construction, on July 31 Bismarck issued a $400,000, 3-year, 12% note payable at Wellington National Bank, on which interest is payable each July 31. $300,000 of the proceeds of the note was paid to Duval on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities at 10% until November 1. On November 1, Bismarck made a final $100,000 payment to Duval. Other than the note to Wellington, Bismarck's only outstanding liability at December 31, 2012, is a $30,000, 8%, 6-year note payable, dated January 1, 2009, on which interest is payable each December 31.

(a)	Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2012.

Interest revenue	$
Weighted-average accumulated expenditures	$
Avoidable interest	$
Interest capitalized	$

(b)	Prepare the journal entries needed on the books of Bismarck Company at each of the following dates. (1) July 31, 2012. (2) November 1, 2012. (3) December 31, 2012.

Date	Description/Account	Debit	Credit
7/31	Trading securitiesMachineInterest revenueInterest expenseInterest payableCashNote payable
	MachineInterest expenseCashTrading securitiesInterest revenueInterest payableNote payable
	CashMachineNote payableTrading securitiesInterest payableInterest revenueInterest expense
	MachineInterest revenueInterest expenseInterest payableTrading securitiesNote payableCash
	Note payableCashMachineInterest payableTrading securitiesInterest revenueInterest expense
11/1	Interest expenseCashTrading securitiesInterest revenueInterest payableNote payableMachine
	Interest revenueInterest expenseInterest payableTrading securitiesCashNote payableMachine
	Trading securitiesNote payableCashMachineInterest revenueInterest expenseInterest payable
	Interest revenueInterest expenseMachineInterest payableCashTrading securitiesNote payable
	Interest payableInterest revenueNote payableCashMachineTrading securitiesInterest expense
12/31	CashInterest revenueInterest payableInterest expenseMachineNote payableTrading securities
	MachineCashInterest payableNote payableTrading securitiesInterest revenueInterest expense
	Interest revenueInterest payableInterest expenseCashNote payableMachineTrading securities
	Note payableTrading securitiesInterest expenseInterest revenueInterest payableCashMachine